South Korea Economy and Housing Market Update for 2020

By: Lance Tao

Communications Manager, Canada Wood Group

2020 South Korea Economy:

The South Korean economy suffered a 1.1% retreat in 2020, marking the sharpest contraction since the 1997 financial crisis.

Exports fell by 7.2% YOY to $516.6 billion while imports dipped 8.8% to $434.7 billion.

As a result, the current account surplus climbed to $81.9 billion in 2020, up $15.6 billion, or 26.1% from the previous year, a remarkable accomplishment.

2021 Growth Outlook:

The IMF has raised its growth outlook for South Korea this year to 3.1% from the earlier figure of 2.9% (October 2020), due to government’s aggressive policy responses to the COVID-19 crisis, including economic stimulus as well as strict quarantine measures.

2020 Housing & WF Construction:

South Korea’s total housing starts in buildings for 2020 slightly increased 0.5% to 66,084 buildings from a year earlier while total floor area increased 20.7% to 40.260 million square meters. Due to the prolonged pandemic, housing permits for 2020 decreased 2.5% and 0.4% to 72,565 buildings and 46.062 million square meters respectively from a year earlier.

South Korea Housing Starts: 2006 ~ 2020

Owing to successful building code evolution and new seismic design tools for small-scaled buildings, the number of wood building starts and permits for 2020 increased 0.9% and 4% to 10,102 buildings and 12,016 buildings respectively from 2019 after three years of consecutive shrinkage.

Wood Building Permits and Starts: 2006 ~ 2020

2021 Growth Outlook for Housing Market:

Housing prices in South Korea have significantly risen in recent years despite government’s efforts to stabilize the real estate market, including tax hikes and loan regulations.

Vowing to make use of all available policy measures to rein in the heated market, South Korea will put priority on increasing housing supply by lowering construction regulations in densely populated urban areas and supporting redevelopment projects to stabilize the housing market.

To speed up new projects, the Ministry of Land, Infrastructure and Transport selected eight areas in Seoul for pilot redevelopment with public developers, including the state-run Korea Land and Housing Corp. and Seoul Housing & Communities Corp. Whilst redevelopment projects often get delayed due to layers of regulation and lack of consensus amongst existing residents and stakeholders, the participation of public developers should accelerate the process.

Government plans to add 132,000 houses in metropolitan Seoul by 2028, and another 330,000 units by developing land owned by the military and public organizations.