"Shortage of 500,000 Small Houses... Construction Costs Must Be Realistic to Increase Supply"

Jusan-yeon, "Standard Construction Cost Unrealistic"

Interior space of a small house for single-person households

[Asia Economy Reporter Ryu Tae-min] As the proportion of one- and two-person households exceeds 60% of the total, an analysis has emerged that the stock of small-sized housing in the metropolitan area for these households is short by 500,000 units.

According to the 'Small-Sized Sale Housing Market Outlook and Improvement Measures for Supply Expansion' released on the 29th by the Korea Research Institute for Human Settlements (KRHIS), the housing stock compared to small-sized housing resident households was found to be short by 504,191 units in the metropolitan area alone, including 383,258 units in Seoul as of 2019.

KRHIS explained, "Demand for small-sized housing is increasing due to the rise in one- to two-person households and elderly households, decrease in household members, increase in housing prices, and improvement in housing quality," adding, "Although the government is expanding the supply of small-sized public sale housing such as Newlywed Hope Towns, there are large regional supply-demand disparities, and the basic construction cost, which does not reflect reality, reduces project profitability, making sustainable supply difficult."

Furthermore, KRHIS forecasts the expected demand for small-sized sale housing from 2020 to 2025 to be 249,000 units, suggesting that the shortage of small-sized housing is inevitably expected to worsen at the current supply level.

KRHIS argues that the realization of construction costs is necessary to continuously expand the supply of small-sized housing. Small-sized housing has lower profitability and higher loss structures compared to medium- and large-sized housing, resulting in insufficient supply.

KRHIS analyzed and compared the construction costs and basic construction costs of six Newlywed Hope Towns, finding that the above-ground construction cost of small-sized sale housing was estimated to be 1.3 to 1.4 times the current above-ground basic construction cost, and the underground cost was 1.7 times. KRHIS explained that the reason the basic construction cost is lower than the actual construction cost is that the characteristics of small-sized housing, which require a higher input per unit area, were not sufficiently reflected in the basic construction cost calculation process.

KRHIS stated, "To sustainably expand the supply of small-sized sale housing, it is necessary to realize the basic construction cost," and argued that "a 30% increase compared to the current level is needed." However, it added that a sharp increase in basic construction costs could lead to a rise in sale prices, so a gradual increase of 5-10% per year could be considered. It also emphasized the need to actively utilize policies such as lowering project financing interest rates and raising loan limits to minimize the impact on sale prices for consumers.

This content was produced with the assistance of AI translation services.