So far this year, the scale of dwelling construction has decreased for three consecutive years, raising concerns about a housing supply crisis in 2026-2027. As the impeachment situation continues, issues such as delays in project financing normalization measures and rising exchange rates have compounded the unfavorable conditions for the supply of real estate.
According to the Ministry of Land, Infrastructure and Transport on the 10th, dwelling construction peaked at 583,000 units in 2021, then fell to 383,000 units in 2022 and 242,000 units in 2023. As of October this year, the cumulative number stands at 218,000 units. The decrease in dwelling construction, viewed as a leading indicator of housing supply, suggests a reduction in completion and occupancy about three years from now.
Comparing the new dwelling demand indicated by the government, one can intuitively sense a forthcoming supply crisis. According to the Ministry of Land, Infrastructure and Transport's 'Third Long-term Comprehensive Housing Plan' published last September, new dwelling demand was estimated at 448,000 units last year, 444,000 units this year, 427,000 units next year, 412,000 units in 2026, and 402,000 units in 2027. From next year through 2026, the supply is expected to fall short by about 100,000 units compared to new dwelling demand. In 2026-2027, the supply may meet less than half of the new dwelling demand.
Kim Seung-jun, a researcher at Hana Securities, noted, "Up until this year, there has been enough occupancy to meet new dwelling demand. However, as construction has been decreasing, we anticipate a reduction in dwelling occupancy from next year through 2027."
Compounding the issue, political uncertainties such as the state of emergency and impeachment situation are further heightening concerns over housing supply. With the construction industry facing funding difficulties due to a tightening project financing market, the subsequent measures for improving the project financing system have also become uncertain. The government announced last month that it would implement support and regulatory measures to increase the equity ratio of construction companies.
Additionally, the surge in exchange rates may lead to rising raw material costs, which could further increase construction expenses. This is because a significant portion of materials such as rebar, sand, and anthracite are imported. The exchange rate of the won against the dollar exceeded 1,440 won shortly after the declaration of a state of emergency and is currently fluctuating in the upper 1,420 won range. Financial markets are keeping the possibility of further exchange rate increases open. Kim Sang-hyun, head of research at KB Securities, said, "With the impeachment bill being rejected in the National Assembly, the confrontation situation is continuing," and added, "Since 2000, the exchange rate has been perceived to top out at around 1,450 won, excluding during the financial crisis. Whether it reaches this level is noteworthy."
A representative from a large construction company stated, "We are continuously expressing that we are conducting business and construction normally with overseas clients, while closely monitoring market trends such as the financial market and raw material prices."
Kim Min-hyung, a visiting professor at Chung-Ang University's Graduate School of Construction, said, "If the current state of political uncertainty continues for a long time, it could lead to further increases in exchange rates, raising construction costs. Additionally, the likelihood of the supply roadmap announced by the government—which includes supplying 50,000 units in the metropolitan area—operating normally is decreasing, creating a situation that requires special measures."