Housing Prices Are out of Control

      June 24, 2021 13:09

      The Citizens' Coalition for Economic Justice has found that apartment prices in Seoul surged 93 percent during the four years of the Moon Jae-in administration. The Ministry of Land, Infrastructure and Transport, however, claims that the growth rate has only been 17 percent. It cites data from the Korea Real Estate Board, which has been criticized for failing to reflect real prices due to a lack of samples, while the CCEJ analyzed 115,000 apartments. According to the citizen's coalition, a 100 sq.m apartment in Seoul cost on average W620 million in 2017, when President Moon took office, but had surged to W1.19 billion by May of this year (US$1=W1,137). Moon said during his New Year's address in 2020 that apartment prices need to "return to normal." But since then they have skyrocketed another 27 percent.

      Governments around the world adopted ultra-expansionary fiscal policies due to the coronavirus pandemic, so housing prices have soared everywhere. But in Seoul they have still grown at a much sharper rate. Housing prices compared to income rose seven percent in Germany, the U.K. and the U.S. over the past year but declined 0.5 percent in Japan. In contrast, they surged 13 percent in Korea, the fastest in the OECD. The Moon administration's failed real-estate policies compounded by extremely low lending rates prompted people to borrow money like there is no tomorrow. As a result, residential property prices went through the roof along with jeonse or Korean-style deposit lease and rents.

      Over the last four years, the government has tried to spur economic growth by raising wages with its so-called "income-led growth" doctrine. But over that period, the annual disposable household income in fact edged up only seven percent or W2.89 million, while apartment prices surged 93 percent or W570 million. In other words, housing prices grew a staggering 191 times more than incomes. This would not happen in a normal country. If an average wage earner saves up all her money without spending a penny, it would still take her 25 years to be able to afford an apartment in Seoul. As recently as four years ago, it took 14 years to do that. For low-income households, buying a home is now a complete pipe dream. Four years ago, it took 71 years for a person in the bottom 20 percent of the wage bracket to afford a 100 sq.m apartment in Seoul by saving disposable income. Now it would take 118 years.

      Under the watch of this government, which claims to support the poor and needy, apartment prices have surged out of the range of almost any normal person and the gap between rich and poor has widened into an unprecedented chasm. This is solely the fault of a government that has stubbornly pushed on with real-estate and wage policies founded on total economic illiteracy.

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