'Rebar Omission' LH Faces Inevitable Public Sale Supply Disruptions... Concerns Over Soaring House Prices Amid Supply Shortage

Construction Started Down 73% and Permits Down 21% in First Half of Year
Scheduled Project Participant Contracts Also Halted

The ‘rebar omission’ scandal at Korea Land and Housing Corporation (LH) has triggered an emergency for the government’s plan to supply 500,000 public sale housing units. Due to the impact of interest rate hikes and rising raw material costs, all supply indicators for public sale housing?such as permits, groundbreaking, and sales?have sharply declined in the first half of this year, and the recent rebar omission scandal at LH has led to a series of contract suspensions for scheduled projects.

Moreover, with the construction and real estate markets in recession, private housing permits and groundbreaking volumes are also decreasing, raising concerns that a severe housing supply shortage crisis may occur in 2 to 3 years.

Last October, the government announced a plan to supply 500,000 public sale housing units to stabilize housing for youth and low-income citizens, but the number of public sale housing units started in the first half of this year was less than half compared to the previous year. The photo shows the promotional hall of the Goyang Business Headquarters of the Korea Land and Housing Corporation (LH) in Goyang-si, Gyeonggi-do. Photo by Yonhap News.

◆Public Sale Housing in the First Half of the Year Less Than Half Compared to Last Year

According to the National Statistical Portal (KOSIS) on the 20th, the public sector was responsible for groundbreaking 4,804 housing units in the first half of this year. Among these, the volume of public sale housing groundbreaking, excluding public rental and national rental, was only 1,713 units. Compared to 6,362 units of public sale housing groundbreaking in the first half of last year, this represents a decrease of about 73%. The number of public sale permits also dropped by about 21%, with 5,257 cases (1,662 by local governments and 3,595 by LH) compared to 6,659 cases in the same period last year.

Earlier, the government announced the ‘Plan to Supply 500,000 Public Sale Housing Units for Youth and Low-Income Housing Stability’ in October last year. According to this plan, an average annual supply of 100,000 units should be achieved over five years, but the public sale housing groundbreaking performance in the first half of this year did not even reach half of last year’s level.

Amid this situation, as the LH rebar omission scandal revealed issues of preferential treatment for former officials, Minister of Land, Infrastructure and Transport Won Hee-ryong urgently ordered LH on the 15th to suspend all procedures for contracts with former officials’ companies and service agreements. Accordingly, contracts have been completely suspended at six sites?Ichon Janghowon, Daejeon Jukdong 2, Busan Daejeo, Ulsan Seonbawi, Sejong Jochiwon, and Daejeon Sangseo?where design service winners were recently selected after review.

All design service winners at these sites are either companies linked to former officials or involved in supervising apartments with rebar omissions. The housing supply volume at these six sites totals 52,700 units, most of which are scheduled for permits (district plan approval) next year.

LH’s recruitment of residents for public sale housing is also sluggish. LH announced in March this year a plan to recruit residents for 6,353 public sale units, including New Home and Newlywed Hope Town in 14 complexes, but so far, the only supply achievement is 688 units at Hwaseong Taean 3, supplied in July.

LH states that it will strive to proceed with public housing projects normally, but adjustments to housing supply volume and timing are expected to be inevitable.

◆Private Sector Also Struggling, Public Sector Cannot Support... Concerns Over Supply Drought in 2-3 Years

The construction and housing industries predict that with the severe real estate market downturn and the sharp decline in public sale housing volume, a supply shortage may be faced in 2 to 3 years.

According to the Ministry of Land, Infrastructure and Transport, nationwide housing groundbreaking this year was 92,490 units, a drastic 50.9% decrease compared to 188,449 units in the same period last year. The number of housing permits in the first half was 189,213 units, down 27.2% from 259,759 units in the same period last year.

Considering that apartment move-ins typically occur 3 to 5 years after permits and 2 to 3 years after groundbreaking, the sharp decline in permits and groundbreaking is likely to directly lead to a future housing supply shortage. Real estate big data company Asil estimates that the number of move-ins in 2025 will be 190,353 units, a 46% decrease compared to 2024, followed by 43,594 units in 2026 and 4,770 units in 2027, indicating a supply drought level.

There are also predictions that the housing supply shortage will cause a sharp rise in real estate prices in the future. In fact, during the 2012-2013 global financial crisis, the real estate market fell into recession, and as supply became insufficient, housing prices rose 1 to 2 years later.

Han Mundo, a professor in the Department of Finance and Real Estate at Yonsei University, said, “When the private housing market is weak, public housing supply should support it, but that is not the case now,” adding, “A supply shortage may occur in 2 to 3 years.”

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