South Korea Economy and Housing Market Update for 2021
2021 South Korea Economy
South Korea’s GDP grew 4% year-on-year in 2021, posting the highest growth rate in 11 years. Exports rose 9.7%, bouncing back from a 1.8% contraction in 2020 and imports also rose 8.4%, compared to a 3.3% decline in 2020. Private consumption expanded 3.6% in 2021, compared to the previous year’s 5% contraction. Facility investment grew 8.3% in 2021, slightly increased compared to a 7.1% gain in 2020. Investment in construction, however, shrank 1.5% in 2021, worse than the 0.4% decline a year earlier. Government spending expanded 5.5% in 2021, higher than the previous year’s 5% gain.
Despite the overall recovery, the South Korean economy faces growing downside risks as the latest upsurge in COVID-19 cases and the spread of the omicron variant are casting a cloud over the recovery of private spending.
External economic risks also heightened due to increased tensions between Russia and Ukraine and the prospect that the Federal Reserve is likely to accelerate its monetary tightening.
South Korean economy is projected to expand 3% in 2022 after 4% growth in 2021.
2021 South Korea Housing & WF Construction
To damp down the over-heated property market, the South Korean government is speeding up efforts to increase the supply of affordable housing and crack down on speculators and those who manipulate the housing market.
The current South Korean government* has announced dozens of comprehensive programs to supply homes as it seeks to curb high-flying home prices.
* The 20th presidential election is scheduled on March 9. The presidential election has once again come down to the candidates from the two major parties – the Democratic Party of Korea and the People Power Party.
Many of their pledges on social issues outside of the field of politics are almost indistinguishable, promising improved support for the populace. But on foreign relations, defense, and the economy, the two candidates are poles apart.
With support from government policies and increasing demand, South Korea’s Housing Starts and Permits in number of buildings and total floor areas for 2021 notably increased from a year earlier.
- Housing Starts as measured by number of buildings and total floor areas for 2021 increased 10.7% to 73,145 buildings and 16.2% to 46.783 million square meters respectively from a year earlier.
- Housing Permits in number of buildings and total floor areas for 2021 increased 14.2% to 82,866 buildings and 25% to 57.576 million square meters respectively from a year earlier.
After three consecutive years of shrinkage from 2017, the number of wood building starts and permits showed shoots of recovery in 2020, attributed in part to code and standards efforts by CWK (i.e. development and promulgation of the Small Scaled Building Code-Timber Structure) plus capacity building with architects and engineers via tech-transfer programming.
This improving trend continued in 2021, marking the second consecutive year of growth.
The number and total floor area of wood building starts and permits in 2021 increased 7.9% to 10,897 buildings and 11.6% to 1,037,749 m2 and 6.9% to 12,845 buildings and 12.6% to 1,192,511 m2 respectively from a year ago.
This growth of wood frame construction occurred against a backdrop of record high prices for Canadian SPF structural lumber and OSB panels.