Half-Built Apartment Complexes Signal End of Boom

      November 03, 2009 11:52

      Some 112 apartment complexes across the country have stood empty for more than three years because construction was halted before completion, according to the Ministry of Land, Transport and Maritime Affairs. The concrete shells are the result of speculative construction by property developers without proper research on potential demand, simply in the belief that they will find buyers amid the boom.

      "Construction companies have been building identical apartments throughout the country without proper planning, showing just how crazy Koreans are about apartments," said Jun Sang-in, a professor at Seoul National University's Graduate School of Environmental Studies. Around 80 percent of the 7.28 million housing units built since 1995 were apartments. Today, one in every two housing unit in Korea is an apartment. Until 1985, there were only 820,000 apartments across the country, but this increased eight-fold to 6.62 million in 2005.

      Construction companies are not the only ones to blame for Korea becoming a "republic of apartments." Regional governments issued almost unlimited permits for apartment construction without discretion because they believed it would help develop their regions and increase tax revenues. The government is also to blame. The Korea Housing Corporation (now the Korea Land and Housing Corporation) is building apartments even in small regional towns where there is already an oversupply of housing to follow the government's policy to increase housing supply for low-income families. 

      The first apartment block was built in Korea in 1958. It was a five-story building in Jongam-dong in northern Seoul. At that time, apartments were such a novelty that people referred to them as landmarks. Fifty years on, they have become icons of Korea's housing culture. With the spread of mass-produced apartments, the country was able to overcome a chronic housing shortage. In 1970, it was able to meet only 78 percent of total housing demand, but the figure reached over 100 percent last year.

      "Apartments allowed us to boost both the number and quality of houses over a short period of time," said Korea Housing Institute president Nam Hui-yong. But as they have proliferated, more attention is now being paid to the adverse effects. Reckless construction has damaged beautiful landscapes across the country, while trillions of won have been borrowed to build apartments on spec, forcing construction companies to the brink of bankruptcy. The overall result, experts say, is a burden on the country's economy and society.

      Construction has been halted in many areas outside Seoul after builders failed to find buyers. There are around 130,000 unsold apartments, and although there has been some improvement recently, the number of unsold apartments contrasts starkly with the figure during 2001 to 2003, when there were only around 30,000 unsold.

      Developers risk defaulting on around W13 trillion (US$1=W1,183) as apartments remain unsold, or around W100 million per unit. There has already been a wave of bankruptcies.

      Seoul, where there is always more demand than supply, also poses problems as developers think that the answer is to build more apartments faster, without concern for the overall design of the city and the appearance of its skyline. "Even taking a shortage of housing supply in the capital into account, apartments will become eyesores in Seoul in 10 or 20 years unless their designs become more diversified and they're built further apart from each other," said Han Ki-young, director of architectural firm Gansan Partners.

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