SEOUL – In a bid to revitalize the country's struggling construction sector, South Korea's government is considering a plan to have the Korea Land & Housing Corporation (LH) purchase unsold apartments in regional areas. This initiative is part of a broader effort to address the growing issue of unsold housing units, particularly in the provinces.

Rising Unsold Inventory

As of December 2024, the number of unsold apartments nationwide reached 70,173 units, the highest figure in 12 years since late 2012. The glut of unsold units is spreading faster than anticipated, leading to concerns about a potential downturn in the construction industry.

Government Intervention

In response, the government is stepping in to supplement existing real estate measures. The Ministry of Land, Infrastructure and Transport has announced that it will consider having LH purchase unsold apartments in regional areas and convert them into public rental housing. The ministry is also exploring the possibility of raising the mortgage guarantee limit for Corporate Restructuring Real Estate Investment Trusts (CR REITs) from 60% to 70%.

Challenges with CR REITs

CR REITs, which are designed to purchase and manage unsold properties, have faced challenges in gaining traction. These investment vehicles have struggled to reach agreements with developers on purchase prices, hindering their effectiveness.

Minister's Remarks

During a recent parliamentary hearing, Land Minister Park Sang-woo acknowledged that there are about 3,800 unsold units under negotiation for purchase by CR REITs. He expressed optimism that these deals would be finalized soon.

Additional Measures

In addition to the LH purchase plan and CR REIT initiatives, the government is also considering easing regulations on construction companies' responsibility for completing projects. This move aims to alleviate some of the financial burden on builders and encourage more construction activity.

Outlook

The government's multi-pronged approach reflects its commitment to stabilizing the housing market and supporting the construction sector. By directly addressing the issue of unsold inventory and promoting investment in distressed properties, the government hopes to prevent a deeper slump in the industry and mitigate potential risks to the broader economy.