The Korea Herald

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Why won't S. Koreans have kids? Costly housing, report says

By Yoon Min-sik

Published : Jan. 3, 2024 - 18:06

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Apartment complexes blanket Seoul, Dec. 21. (Yonhap) Apartment complexes blanket Seoul, Dec. 21. (Yonhap)

The biggest factor influencing South Korea's families in deciding whether or not to have children is the cost of housing, a state research institute-issued report published Wednesday shows, in an analysis of various economic and labor factors.

Researchers at the Korea Research Institute for Human Settlements analyzed the country's birth rate patterns, using data from Statistics Korea, and concluded that declines have been particularly profound during housing cost spikes. They noted that the birth rate has tended not to change very much when housing prices have been stable.

Using a dynamic panel data model, the researchers found a correlation between the total fertility rate -- the number of children expected to be born to a woman through the end of her child-bearing years in alignment with prevailing age-specific fertility rates -- of a given year and the factors that are thought to affect family planning. These include the various figures from the year before, including: housing prices, rents, private education fees, economic growth and the unemployment rate.

The cost of housing -- with includes the cost of buying or renting a home -- was the biggest factor affecting married couples from having their first, second or third children, although their impact varies slightly.

More specifically, researchers found that a 1 percent rise in housing prices in any given year led to the total fertility rate declining by 0.00203, and a 1 percent rise in rents led to a decline by 0.00247.

The report said that 30.4 percent of married couples' decisions to have their first child can be attributed to the cost of housing, followed by the birth rate of the previous year, with 27.9 percent.

For the second child, the cost of housing affected 28.7 percent of families' decisions, followed by the previous year's birth rate at 28.4 percent. The figures for third children were 27.5 percent and 26.1 percent, respectively.

The effect of private education on families' decisions, however, rose dramatically after the first child to the second, as well as to the third child. It affected couples' decisions to have their first child by only 5.5 percent, but then doubled to 9.1 percent for their second child, and rose even higher to 14.3 percent for their third child.

The effect of women's economic activity participation rate -- referring to how much of the female population is working or willing to work -- on families' decision to have children was consistently high, from affecting 16.5 percent in deciding to have their first child, to 15.9 percent and 15.5 percent in deciding to have their second and third child. These figures indicate that the women's steady employment is an important factor affecting married couples' decision to have children.

Dual-income households made up 46.1 percent of the 12.69 million married households in October 2022, according to Statistics Korea in June last year, marking an all-time-high figure since the agency started its tally.

The KRIHS researchers said that one key to addressing South Korea's record-low fertility rate is solving housing costs.

"(The government) must adopt policies so that financially-challenged newlyweds are able to acquire homes without taking out an excessive amount in loans," they wrote.