This year, the number of private apartments supplied by construction companies is expected to be less than 160,000 units, marking the lowest annual supply on record. It is analyzed that construction companies are facing challenges in supply due to high interest rates, real estate project financing (PF) failures, and soaring construction costs amid a real estate market recession.
According to the real estate R114's '2025 private apartment sales plan' compiled on the 12th, as of Dec. 24 last year, a total of 146,130 units are expected to be supplied across 158 establishments, based on a thorough investigation of the private apartment sales (including rentals) of 25 major construction companies in Korea this year.
Even if we add 11,000 units from GS Engineering and Construction, Lotte Engineering and Construction, and HDC Hyundai Development Company, which were not included in the survey, the total will only amount to about 157,000 units.
This is the smallest supply figure since the relevant statistics began to be compiled in 2000. The lowest previous supply occurred in 2017, with 172,670 units sold. The number of units expected to be sold this year is about 29% lower than last year's actual sales figure of 222,173 units. Furthermore, it is only half of the average annual supply (268,601 units) since 2016.
More than 30% of the supply this year has not yet defined a sales timeline. According to real estate R114, the proportion of planned supply across the country whose timing has not been set is 33%.
Regionally, 59% (85,840 units) of the total supply is concentrated in the metropolitan area. This has increased from 40% in 2021, 43% in 2022, 56% in 2023, and 57% last year. It is expected that 55,050 units will be supplied in Gyeonggi Province, 21,719 units in Seoul, and 13,571 units in Incheon. In the provinces, 60,290 units are expected to be supplied, with Busan having the highest at 18,007 units, followed by South Chungcheong with 13,496 units and South Gyeongsang with 6,611 units.
This year's sales volumes for the top 10 construction companies by construction capability are expected to decrease by more than 30% compared to last year. The sales plan volume for the top 10 construction companies this year is 107,612 units, which is about 69% of last year's 155,892 units. Of this, 53% (77,157 units) will be from self-managed projects (including contracts), while 47% (68,973 units) will be from maintenance projects (including remodeling).
The reasons for the contraction in supply by construction companies this year include the high interest rate trend, failures in real estate project financing (PF), rising raw material prices, and the spread of political uncertainty domestically, making it difficult to expect a recovery in the real estate market.
A construction industry official noted, 'Just last year in the first half, we thought the real estate market would improve by this year, and even though the situation was difficult due to high interest rates and a sluggish PF market, we believed we could hold on for a little while longer. However, with the impeachment political situation unfolding in the second half of last year, it seems that it will take at least a year for the real estate market to recover, making it risky to hastily increase supply.'
An official from a major construction company said, 'Construction companies have endured rising construction costs for several years, even at a loss, but now their financial capacity has significantly reduced, and if the client does not secure more than 90% of the construction costs, they won't begin construction.' They added, 'Because the actual sales results often fall short of the initial planned supply, the real sales volume will likely be even lower.'
Experts predict that the decrease in supply observed this year may lead to a reduction in move-in volumes 2-3 years down the line, which could deliver a shock to the real estate market. In particular, the decrease in supply is analyzed to act as a factor in rising prices in the rental market in 2027-2028.
Yoon Ji-hae, head of the research team at real estate R114, explained, 'The sales volume is directly linked to move-in volumes two to three years later, and a decrease in sales could lead to a reduction in move-in volumes, resulting in a shock to the housing market.' She continued, 'First, the rental market is expected to become unstable, and then the sales market will also react, showing upward price movements.'