President Lee Highlights Three-Year 'Housing Supply Gap': This Year's Move-In Cliff Becomes a Boomerang [Real Estate AtoZ]

Prolonged Slowdown in Housing Approvals and Groundbreaking Under Previous Administration

President Lee Jae-myung, during a press conference marking his first year in office on June 8, emphasized the need to accelerate housing supply and pointed out the significant reduction in supply between 2022 and 2024. This is interpreted to mean that the cumulative underperformance in approvals and groundbreaking over three years under the Yoon Suk-yeol administration has led to a decline in new housing completions and price instability this year.

President Lee stated, "I generally try not to speak ill of others, but housing supply dropped sharply for three years from 2022 to 2024. Both reconstruction and redevelopment declined significantly, as did approvals and groundbreaking, with supply volume reduced to nearly half." He added, "Whether it's new construction, site development, or reconstruction/redevelopment, we need to move quickly and speed up the process."

President Lee Jae-myung. Photo by Cheong Wa Dae Press Photographers Group

During this period, housing approvals and groundbreaking showed a marked downturn. According to the Ministry of Land, Infrastructure and Transport’s housing construction approval data, the number of nationwide housing approvals dropped 17%, from 528,901 units in 2022 to 441,602 units in 2024. Nationwide housing groundbreaking fell 21% during the same period, from 386,039 units to 303,433 units, with private sector groundbreaking dropping 28% to 249,684 units. This indicates that many projects were unable to break ground despite receiving approvals due to blocked financing.

The situation in the private pre-sale and affordable housing markets, as perceived by actual homebuyers, deteriorated even further. Private housing approvals fell 36%, from 473,634 units in 2022 to 304,217 units in 2024—more than double the overall approval decline rate. In particular, approvals for villas (multi-family and row houses), which serve as a housing ladder for low- and middle-income households, plunged 72% over the same period, from 43,825 units to 12,258 units. This is attributed to a freeze in villa demand following the jeonse rental fraud scandals, as well as worsening financing conditions, which effectively brought small-scale housing projects to a standstill.

This period was also heavily affected by the aftermath of the Legoland crisis in October 2022. As the short-term money market froze, an increasing number of projects could not convert bridge loans into main project financing. In addition, rising material prices for cement and steel, along with higher labor costs, undermined project profitability. Faced with both interest rate hikes and escalating construction costs, private developers either postponed or abandoned new approvals and groundbreaking.

Villa district in downtown Seoul as seen from Namsan, Seoul. Photo by Dongjoo Yoon

The supply shortage referenced by the president is reflected in this year’s occupancy statistics. According to KB Real Estate, the number of apartments scheduled for occupancy nationwide this year is 177,467 units—a 39.5% decrease from 293,281 units in 2022. In the capital region, where demand is concentrated, the decline is even sharper, with occupancy dropping 46% from 163,290 units to 88,049 units over the same period, effectively halving supply.

The reduction in new completions is cited as a factor causing both a shortage of jeonse rental listings and upward pressure on sale prices. Typically, it takes four to five years from approval to occupancy, and two to three years from groundbreaking to occupancy. The contraction in approvals and groundbreaking that began in 2022, during the Yoon Suk-yeol administration, is now being fully reflected in this year’s reduced supply.

President Lee stated, "We are currently organizing policies to expand supply, and we will soon make an announcement to speed up these efforts. For public housing, we intend to provide high-quality rental units in good locations, affordable enough for ordinary middle-class households to live comfortably."

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