The Peninsula

Real Estate Remains a Persistent Achilles Heel

This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.

What Happened

• Although the government announced a new real estate policy on June 17, the unabated increase in housing cost attracted criticism from left-wing figures and groups.
• Adding to the growing dissatisfaction, research by news agencies revealed that many high officials were multi-homeowners. This prompted President Moon Jae-in to strongly urge senior government figures to sell any additional homes they own.
• According to polls released on June 24, 57.1% of people in their 30s said that the current government’s housing policy is “untrustworthy.” The 49.9 percent of the same cohort also responded negatively to the overall direction of the government’s economic policy, overtaking negative sentiments of respondents in their 50s.

Implications: More than challenges associated with managing South Korea’s ties with the United States or North Korea, disciplining Seoul’s housing market remains the issue that consistently catalyzes the most public scrutiny against the Moon Jae-in administration. The soaring real estate market has been a stumbling block for the administration since it took office in 2017. Critics point to its over-regulation of the market as the source of more intense speculative behavior and cost of living inflation for people without homes. As the Moon administration heads into the second half of its five-year term, the failure to address housing price volatility may erode the public mandate it gained in the April 15 legislative election.

Context: The Moon government’s strict real estate regulation draws on the policies of the previous progressive administration under President Roh Moo-hyun. The Roh administration introduced comprehensive real estate holding tax and implemented strong real estate regulations. However, it failed to control speculative behavior in the market. As a consequence, real estate prices continued to rise and created an opening for the conservative opposition to characterize progressive as “economically incompetent.”

Korea View was edited by Yong Kwon with the help of James Constant, Sonia Kim, and Ingyeong Park.

Picture from user Chris Harber on Flickr