KDI "Sharp Rise in Jeonse and Monthly Rent Prices Due to Housing Supply Shortage"... Need to Ease Reconstruction Regulations

'Integrated Housing Cost' Converted to Monthly Rent in Lease Contracts Up 7.3% in 2021
Supply Shortage Expected to Continue Due to Rising Construction Costs... "Need to Ease Redevelopment Regulations"

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Kwon Haeyoung] An analysis by a national research institute revealed that domestic housing rent has been rising sharply since 2020 due to a decrease in housing move-in volume. It pointed out that regulations on redevelopment projects should be eased to focus on smooth new supply, moving away from the regulation-only approach that blocks housing supply out of concern for rising house prices.

According to the report "Changes in Rental Housing Costs and Housing Supply" released on the 28th by the Korea Development Institute (KDI), South Korea's real integrated housing cost sharply declined from 2012 to 2019 compared to the baseline (end of 2011), then shifted to an upward trend, recording 3.9% in 2020 and 7.3% in 2021. The real integrated housing cost is an indicator that converts actual transaction apartment lease contracts from the Ministry of Land, Infrastructure and Transport into monthly rent.

The report also analyzed that the real jeonse index rose sharply recently, increasing by 8.1% in 2020 and 9.6% in 2021.

Oh Jiyoon, head of KDI's real estate research team, diagnosed, "The recent rise in integrated housing costs after a long period of decline is closely related to supply changes. Both the metropolitan area and non-metropolitan areas saw a significant increase in housing construction in 2018-2019, causing real housing costs to fall, but then housing move-in volume decreased, leading to a rise in housing costs."

Concerns were also raised that housing supply delays are likely due to increased construction costs from recent inflation, suggesting that supply-related regulations should be eased to lower housing costs. The construction deflator, which reflects construction costs, soared to 1.5% in 2020, 9.5% in 2021, and accumulated 11.9% in January-February this year.

Team leader Oh advised, "Artificial supply regulations should be avoided so that housing supply can be autonomously carried out according to long-term demand changes. It is necessary to gradually ease regulations related to redevelopment projects so that new supply can proceed smoothly in urban areas where public-led supply is difficult."

There was also a call to revise the current housing cost reflection system related to the domestic consumer price index calculation. Under the current system, when jeonse prices fall due to rising interest rates, housing rent is set low, making inflation rates appear low, whereas when jeonse prices rise due to falling interest rates, rent is set high, creating an optical illusion of higher inflation rates.

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