South Korea is converting hotels and offices into rental units to ease supply shortages amid growing public discontent over surging rents and house prices.
The government said on Thursday that it would provide 114,000 homes for public housing over the next two years by buying empty hotels and offices and renovating them as residential studios.
This is the latest initiative to address the worsening housing problem in the greater Seoul area, where more than half the country’s 52m population lives.
President Moon Jae-in has announced more than 20 rounds of measures to stabilise the property market since he took office three years ago, when he made the housing problem one of his social welfare priorities.
However, his efforts have failed to curb rising apartment prices in Seoul and its surrounding areas. Apartment prices have leapt more than 50 per cent since 2017 — the fastest pace in the world, according to statistics site Numbeo.
The average property in Seoul is now 14 times Koreans’ average annual household income, according to KB Bank data, pricing low and middle-income families out of the market.
The years-long residential property bubble has been exacerbated by record-low interest rates and a new law aimed at protecting tenants. Many Koreans use a home rental arrangement called “Jeonse”, a system unique to South Korea in which tenants pay a large sum of deposit instead of monthly rent. They get the deposit back upon the completion of a contract, usually set at two years.
But the country has faced extreme shortages of Jeonse housing since July, when the government passed the law. The legislation capped the increase of a Jeonse deposit to 5 per cent and allowed tenants to extend their two-year contracts for another two years, unless landlords decided to move into their property.
The law, however, has backfired. It sharply increased Jeonse housing prices for new tenants and a growing number of landlords chose to move in while existing tenants extended their leasing contracts.
Analysts said the latest measures highlighted the government’s desperate attempt to soothe an outraged public. They expect the mismatch between supply and demand to continue.
“It may have some positive effects in increasing supply for one-person households but families with children, at the heart of the housing crisis, will be disappointed as they struggle to find affordable homes in popular areas,” said Yeo Kyoung-hui, an analyst at Real Estate 114, a local property consulting agency.
Mr Moon’s approval rating has fallen to 42.5 per cent, the lowest since October last year.
The government has previously turned military sites into residential areas and relaxed rules on apartment height limits to increase supply. It has also tightened loan regulations in a bid to curb demand for new housing purchases.