900-Unit Apartment Complex Stands Empty, Highlighting Severe Non-Metropolitan Housing Glut

A 900-unit apartment complex in Dalseo-gu, Daegu, remains empty as it struggles to find residents. Despite government support measures such as tax incentives and the Korea Land and Housing Corporation's (LH) purchase program, the problem of unsold apartments in areas outside the Seoul metropolitan region persists. On May 6th, the complex, which houses over 900 units, was eerily quiet with no signs of life. As of March, there were 981 completed but unsold apartments in the region. A local real estate agent stated there had not been a single inquiry about a sale.

In August last year, the government announced the 'Strengthening Investment in Construction in Provincial Areas Plan,' which included tax support for second home purchases in depopulating areas and excluding newly built unsold homes from housing count calculations for those owning only one property. However, the industry deems these measures largely ineffective in resolving the issue of 'unsellable inventory.' The government is also working to reduce completed but unsold units by having LH and the Housing & Communities Guarantee Corporation (HUG) purchase them for rental housing.

As of February, completed but unsold apartments nationwide exceeded 30,000 units, reaching a 14-year high. One apartment complex, fully purchased through a Corporate Restructuring REIT last year, has been unable to secure tenants for about 50 rental units for over half a year. The developer offered incentives such as a year's worth of management fees and mortgage interest support, but to no avail. An official from the developer stated that they might attempt to convert units to sale in two years if the economy recovers, but this is unlikely given the abundance of new complexes nearby. The possibility of selling at a steep discount was also a concern.

The government aimed to purchase 3,000 units last year, but due to low property appraisals and stringent screening processes, LH and HUG only managed to acquire 92 units for rental housing. The implementation of the Stage 3 Stress DSR regulations scheduled for July could also negatively impact provincial markets, further dampening already weakened buyer sentiment in these areas.

Opinions suggest that more than simple organizational restructuring is needed; actual measures to 'incentivize provincial living' are required. The fundamental solution to provincial real estate problems lies in creating a structure where provincial areas become desirable places to live, attracting population inflow and revitalizing local industries and jobs to generate housing demand. Tax reductions or purchasing unsold inventory are merely temporary fixes. The priority should be the swift implementation of policies that make provincial areas livable places for people.