May 15, 2009 06:54
Housing demand is expected to suffer when a drastic drop in the birthrate causes the population to shrink from 2019. The National Statistical Office says Korea's population is expected to peak at 49.34 million in 2018 and then begin shrinking. The number of Koreans in their 30s to 40s, the prime purchasers of new homes, peaked at 16.75 million in 2006 and is already dwindling.
The baby boomers, who have led demand for new homes, will begin to retire over the next five to 10 years. Housing supply has already surpassed 100 percent, and new demand is expected to drop in the coming years, leading to lower pressure on prices.
◆ Singles, Two-Family Households Increase in Number
Even though the population decreases, the number of households is expected to rise steadily until 2030 due to the rise in nuclear families, singles and divorcees. The number of households will grow but each will have just 2.4 people in 2030, down from 2.6 in 2008 and 3.1 in 2000. Kim Seon-deok, director of Construction Industry Strategy Research, said the ratio of households of just one person or just a husband and wife will rise from 28 percent of the population in 2000 to 38 percent by 2018, creating more demand for studio-style homes or small homes rather than mid-to-large-sized ones.
◆ Population Growth in Some Areas
Even when the country's population begins to shrink, parts of Gyeonggi Province surrounding Seoul as well as the cities of Incheon, Daejeon and Ulsan will see their populations continue to rise until 2030, the NSO forecast. Gyeonggi Province in particular faces a risk of seeing its population rise from 10.61 million in 2005 to 14.04 million in 2030.
◆ Return to the Big City
The housing choices of singles and double-income couples, whose numbers are forecast to surge, are expected to determine the direction of the market in the future. In the case of Japan, singles and double-income couples favor urban neighborhoods over homes in the suburbs, opting to live in areas closer to their workplaces and metropolitan settings that contain a wider variety of cultural and convenience facilities. Edward Glaeser, a professor of economics at Harvard University, wrote in his book "Urban Resurgence and the Consumer City" that the number of cultural, leisure and convenience facilities in a neighborhood play crucial roles in housing choices. And when populations begin to decline, governments have no choice but to use immigration promotion policies, leading to multi-cultural cities that are more open to foreigners.
Richard Florida, a renowned urbanologist, in his book "Creative City," said the reason New York and London were able to grow into urban centers of the world was because their cultures were open to foreigners, which enabled them to attract talented people from across the globe.
◆ Rise of the Compact Cities
Another area to focus on is the choices that will be made by the seven million-plus baby boomers who will begin to retire five years from now. Retirees usually sell their homes and move in search of cheaper units using the retirement money they raised. There are growing instances in the U.S. where wealthy retirees marry their children off and sell their spacious suburban homes and move in search of "compact cities" where homes, offices and convenience facilities are located closer together.
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