A 2022 Overview: South Korea’s Economic Landscape and Housing Market

By: Tai Jeong

Country Director, Canada Wood Korea

South Korea’s economic growth slowed sharply in 2022 due to weakened exports and recession woes stemming from aggressive monetary tightening at home and abroad. GDP expanded 2.6% in 2022 compared to a 4.1% advance in 2021, marking the slowest pace since 2020 when the economy contracted 0.7% amid the fallout from the COVID-19 pandemic. While exports rose 6.1% to US$683.9 billion in 2022, the highest figure since the government started compiling export data in 1956, imports also rose 18.9% to US$731.2 billion due to supply chain uncertainties as Korea depends on imports for most of its energy needs.

Private consumption expanded 4.3% in 2022, higher than a 3.7% rise in 2021, thanks to eased COVID-19 pandemic curbs. However, facility investment shrank 0.5% in 2022 compared with a 9% advance tallied in 2021, and investment in construction contracted 3.5% in 2022, worse than a 1.6% decline in 2021. Government spending increased 4.1% in 2022, lower than the previous year’s 5.6% advance.

Growth Outlook:

The South Korean economy in 2023 continues to face uncertainties amid global price hikes, but conditions are expected to improve from the second half of the year. The South Korean economy is expected to expand 1.5% to 1.7% in 2023 and 2.4% in 2024.

South Korea’s Housing Market and WF Construction in 2022:

South Korea, particularly Seoul and the metropolitan area, experienced an overheated housing market until monetary easing in the wake of the COVID-19 outbreak gave way to inflation and fast-paced interest rate hikes in 2022. Mainly due to high inflation and interest rates, overall housing transactions in 2022 shrank to a fourth of that in 2021. The South Korean government is speeding up efforts to ease rules for mortgage loans, lower taxes, and provide other financial support as key policies to improve the current market sentiment.

Housing Starts and Permits:

South Korea’s housing starts, in both number of units and total floor areas, in 2022 significantly decreased by 34.3% to 383,404 units and 25.8% to 34.72 million square meters, respectively, from a year earlier. However, owing to the Yoon administration’s policy towards small-sized housing for first-time homebuyers, newlyweds, low-income people, and young generations, housing permits in total floor areas in 2022 remarkably increased by 12.2% to 64.6 million square meters, while the number of units slightly decreased by 4.3% to 521,791 units from a year earlier.

Wood Frame Construction:

Due to the sharp rise in the price of building raw materials, the market for all residential buildings, including wood residential buildings, is shrinking. The number and total floor area of Wood Building Starts in 2022 decreased by 12.6% to 9,528 buildings and 14.3% to 889,520 m2 from a year ago, and those for Wood Building Permits also decreased by 10.2% to 11,541 buildings and 13.7% to 1,028,593 m2.

Wood Building Permits and Starts
Permits# of Buildings17,23112,75011,54912,01612,84511,541
Total Floor Area(m2)1,564,8301,167,2661,039,1381,058,9451,192,5111,028,593
Starts# of Buildings13,93811,82810,01110,10210,8979,528
Total Floor Area(m2)1,285,1281,091,481922,541930,0631,037,749889,520
Source: Ministry of Land, Infrastructure and Transport

Lumber and OSB Shipment to South Korea in 2022:

South Korean demand for Canadian Lumber has fallen steadily in recent years, while producers in Chile (9.7% increase in 2022), New Zealand (40.9%), and Germany (11.1%) have captured a growing share. Canadian Lumber shipments to South Korea continued to lose ground in 2022, falling by double-digit percentages (50.6% decrease based on KFS’ Statistics of Forest Product’s Trade data). The Canadian No 2 & BTR grade market in Korea is losing a significant share to European competitors in 2022, largely because species from Europe, which have strength grade marks, were offered at prices sharply lower than Canadian S-P-F and no-wane appearance.

Buyers in South Korea sought OSB from exporters in Canada, but Canadian OSB shipments to South Korea were limited in 2022, showing a 78.6% decrease (981 m3 based on Statistics Canada data). Price levels of OSB out of Canada remained out of reach for most importers in South Korea, so many turned to alternative suppliers in Chile and Europe to meet their near-term needs.