Since 1962, Korea has followed a very effective economic development plan and has consequently succeeded in transforming itself from an agricultural society to an industrial nation. The Korean economy developed at a rate which had never been experienced before. For example, over several decades Korea maintained an annual growth rate of 9 per cent and as a result the GNP per capita rose from US$87 in 1962 to US$11 380 in 1996. In other words, the GNP per capita rose by 130 times in a period of 34 years. Over the same period the average life expectancy increased from 52.4 years in 1960 to 73.5 years in 1995. Such rapid economic growth was made possible by industrialisation that began with the establishment of labour intensive industries leading to the massive migration of rural manpower. The relative importance of manufacturing industries rose from 17.7 per cent of GNP in 1963 to 32.1 per cent in 1998. Industries concentrated in or near urban centres where the infrastructure was more developed. In turn, this accelerated urbanisation. As a result, urban population rose from 39.1 per cent in 1960 to 87.2 per cent in 1997. More than four out of every five Koreans now live in urban centres of 20 000 people and more.
Urbanisation also brought about various problems including inadequate sewerage and transportation systems and urban poverty. In particular, rapid urbanisation resulted in acute housing shortages, the mismatch between housing demand and supply, housing price inflation and speculative activities (Lee 1995; Lowe 1992). It was inevitable that the increase in housing prices reduced housing affordability. On the other hand, housing speculation meant enormous