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North Korean residents of Kaepung County, North Hwanghae Province, play volleyball outside dilapidated housing. (Kim Bong-gyu, staff photographer)
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Study analyzes potential housing demand and construction investment
North Korean housing construction investment is predicted to total 57 trillion won (US$50.4 billion) and an area of 84.3 million square meters between 2021 and 2030 – an amount that could rise as high as 134 trillion won (US$118.4 billion) and 197.0 million square meters if North Korea pursues reforms and openness that lead to fast growth, a study reports. The predictions were published on Sept. 9 in a report titled “BOK Economic Study: Long-Term Housing Demand in North Korea and Estimates of Related Housing Construction Investment” by Lee Ju-yeong, a senior research fellow with the Bank of Korea (BOK) North Korean economic research office. Using survey data from 470 North Korean defector households to estimate individual housing demand in the North, the report applied future population estimate data from the US to gauge total housing demand for the North Korean population base. “The factors typically understood to determine housing demand are income level, housing costs, and population, among which the population factor determines housing demand in the long-term time horizon,” the report said. According to the analysis, North Korean individual housing demand rapidly rises among people in their 20s and reaches its peak in their 40s, after which it slowly declines. Estimated per capita housing demand in 2007 increases from 13.6㎡ for those under 10 to 19.5㎡ for ages 20–29, 25.1㎡ for ages 30–39, and 26.8㎡ for ages 40–49 before falling back to 24.5㎡ for ages 50–59, 19.8㎡ for ages 60–69, and 15.5㎡ for ages 70 and over. The average annual rate of increase in housing demand based on demographic changes (including differences in age group representation as well as population numbers) was projected to continue a steady decline from 0.9% in the ’00s to 0.6% in the ’10s and 0.3% in the ’20s – based on predictions that the North Korean population will remain in place at the 26 million level during the next decade. The report also considered what may happen if North Korea pursues external openness and experiences full-scale economic growth after 2021. Based on the examples of Vietnam, Laos, and Cambodia, the death rates of those aged under four and 15–59 were assumed to decline by respective levels of 41% and 18% in the case of full-scale openness. A “low-growth” scenario combining these rates with a nationwide expansion of the 0.4% average annual rate of individual housing demand increase (2007–17) for the Chinese border region – the area of North Korea with the greatest level of external openness – resulted in the predicted average annual rate of increase in housing demand increasing by 0.6 percentage points. The rate of increase rose by 1.8 percentage points under a “high-growth” scenario combining the decreased mortality rates with the 1.6% annual average rate of increase in individual housing area found in South Korea during its high-growth years from 1980 to 1990. Overall, North Korea’s housing construction investment was projected to amount to 84.3 million square meters and 57 trillion won (US$50.3 billion) from 2021 to 2030 based on these population estimates – with additional investment ranging from 40.6 million square meters and 28 trillion won (US$24.7 billion) under a low-growth scenario to 112.7 million square meters) and 77 trillion won (US$68.0 billion) under a high-growth scenario if full-scale external openness and economic growth occur. For the calculation of investment totals, the study applied the Korea Land & Housing Corporation (LH) estimate of 2.25 million won (US$1,990) per 3.3㎡ used when building dormitories for the Kaesong Industrial Complex (representing the average between 2 and 2.5 million won [US$1,765-2,207]). “While the increase in population base housing demand for North Korea has been leveling off, it appears poised to increase substantially due to reduced mortality rates and increased individual lifestyle levels if full-scale external openness and economic growth take place,” Lee Ju-yeong said. At the same time, Lee cautioned, “We are relying on survey data for statistics on certain North Korean regions, and we did not take into account North Korean housing policies, which are another factor besides population that determines housing demand.” By Lee Soon-hyuk, staff reporter Please direct comments or questions to [english@hani.co.kr]
