Unsold Housing Units Near 70,000... Government Says "Industry's Self-Help Efforts Come First"

Jung Won-ju, Chairman of the Korea Federation of Construction Industry Associations, "Deterioration of Construction Market"
68,107 Unsold Houses in December Last Year
Ministry of Land, Infrastructure and Transport "No Purchase Plans"

[Asia Economy Reporters Minyoung Kim and Taemin Ryu] As the rate of increase in unsold housing units accelerates recently, opinions have been raised mainly within the construction industry that the government should actively purchase unsold houses. In response, the government has firmly stated that there is "no plan to purchase unsold houses" and emphasized that before demanding government intervention, the industry's self-help efforts to resolve unsold housing should take priority.

[Image source=Yonhap News]

On the 31st, Jeong Wonju, president of the Korea Housing Builders Association (KHBA), urged at a KHBA press conference held in Yeouido, "The construction market is deteriorating due to issues such as unsold houses," and added, "The government needs to take a more active role to recover the construction market."

KHBA proposed four requests to the housing industry: ▲ improving financing conditions for housing developers through better real estate project financing (PF) loan guarantees ▲ providing liquidity support to housing developers holding unsold houses ▲ supporting normalization of housing transactions ▲ creating flexible housing supply conditions.

President Jeong emphasized, "Construction companies are not trying to make excessive profits," and said, "Companies that failed to secure funds during the construction boom find it difficult to endure when tough times come."

According to the Ministry of Land, Infrastructure and Transport, as of the end of December last year, the nationwide number of unsold housing units was counted at 68,107. This is the first time in seven years since 2015 (62,000 units) that the number of unsold houses nationwide has exceeded 60,000 units.

However, the government clearly stated that there are no plans to purchase unsold houses for the time being. The last time the government purchased unsold houses was during the 2009 global financial crisis, when unsold housing units reached 166,000.

A Ministry of Land, Infrastructure and Transport official said, "At present, there is absolutely no plan to purchase unsold houses," and added, "Industry's self-help efforts to resolve unsold housing should take precedence over government intervention."

The official also emphasized that for the government to take proactive measures such as purchasing unsold houses, decision-making should comprehensively reflect not only unsold housing statistics but also the number of unsold houses after completion and macroeconomic indicators.

There are also criticisms that public funds would be used to support construction companies through the purchase of unsold houses. On the previous day, Minister of Land, Infrastructure and Transport Won Hee-ryong said at a meeting with reporters, "At this point, it is inappropriate for LH to buy unsold houses at that price," and added, "It is a case of guaranteeing construction companies' profits with taxpayers' money and encouraging moral hazard." In fact, premature government intervention could induce moral hazard within the industry.

There is also an opinion that the current unsold housing figures are not at a level that threatens the housing market. Lee Eunhyung, a research fellow at the Korea Construction Policy Institute, pointed out, "Even in the early to mid-2010s when the theory of a housing price crash was prevalent, unsold housing figures were similar, but the market operated without major problems," and said, "The current unsold units are those that private companies planned and promoted during the market boom, now coming out as actual supply, and blaming the government for these unsold units is not appropriate."