Korean President flinches as reelections near, ruling afflicted by towering real estate prices

Mired in scandal and haunted by soaring property prices, Moon Jae-In is eyeing the 2022 presidential elections with justified trepidation

The success of Parasite sent out mixed signals from South Korea.

On one hand, director Bong Joon-Ho’s film elevated the country’s movie industry with its unprecedented global success. On the flip side, the parable of class struggle in Seoul laid bare the fault lines of Korean society to a wider international audience.

In the movie, the contrast between the basement hovel-dwelling Kim family who infiltrate the lives of the wealthy Parks could not be starker. While the dramatised plot of the film makes several unlikely leaps in its mission to entertain, its themes of systematic inequality—especially in the housing market—ring true for many poorer Koreans.

When President Moon Jae-In took office in 2017, he made it a cornerstone of his leadership to tackle both house prices and social disparity. Protests that had rocked the country and led to the impeachment of his predecessor Park Geun-hye following a huge corruption scandal were a warning to the new president to fix the country’s social and economic ills.

Not only has the situation deteriorated further, but the president is now tussling with a major housing scandal that could threaten his hopes of reelection.

Since taking office in 2017, Moon has imposed a raft of cooling measures including tax hikes and lending restrictions. But house prices have risen more during his administration than any other since 1995 when statistics were first compiled.

In the past, people believed that real estate prices would stabilise after the government announced new policies. But they are now finally realising that housing prices will continue to rise no matter what the government does

The combined value of homes nationwide reached a high of USD5tn by the end of 2020, up 13.1 percent from a year earlier and up 42.9 percent since 2017.

In Seoul, meanwhile, apartment prices have soared 58 percent during Moon’s tenure.

The measures were intended to curb speculation and a market awash with cash after years of loose lending rules and record-low interest rates under the former administration. The fact they haven’t curbed it reflects the intractability of a problem that goes back decades.

“In the past, people believed that real estate prices would stabilise after the government announced new policies,” said Jung Ji-yeon, a director at Gallup Korea. “But they are now finally realising that housing prices will continue to rise no matter what the government does.”

More: South Korea and Italy join hands in green energy and biotech

Korea’s housing market has been riven by speculation and easy money since the end of the 1990s. Rapid urbanisation and rising demand for housing prompted prices to soar, making owning a home an attractive investment and something of a national trait.

According to a survey conducted in 2020 by data company Statista, around 83 percent of respondents said they should own their homes.

The survey also found that Koreans perceived homeownership as intrinsic to personal stability and this perception would not change even if the value of the home declined.

The sensitivity around owning a home has become acutely felt by young people who have only found it harder to get on the property ladder.

With wages stagnant and youth unemployment high, younger generations have become increasingly frustrated at the barriers to property ownership.

According to national statistics, home ownership among those aged 70 to 79 in 2019 was around 70 percent. In contrast, among those below 30 it was just 10.1 percent.

Indeed, a new term young-gul — meaning to “gather up everything you can, even your soul” to afford a home — has been coined in reference to their plight.

In March, a housing scandal broke involving Korea Land and Housing Corp, a government-owned corporation responsible for the development of land in cities.

At least 20 employees of LH Corp have been accused by civic groups of purchasing 23,000 square metres (5.7 acres) of land for roughly KRW10bn (USD8.9m) in an upcoming development comprising 70,000 housing units, based on classified knowledge they had received.

For those already skeptical about corruption in government, the scandal appeared to confirm their fears. Protesters responded by plastering angry messages on the doors of LH’s office in Seoul. One read: “the den of thieves!”

The government has been quick to condemn the scandal. But the damage it might do to Moon’s chances of reelection was made apparent at mayoral elections in April.

The vote, largely seen as a referendum on Moon and his party ahead of next year’s presidential race, saw its highest turnout for parliamentary elections since 1992 at 66.3 percent. The ruling party lost support from every age group except voters in their forties. Moon’s approval rating dropped below 30 percent for the first time since his inauguration in May 2017.

“The ruling party’s defeat could make him a dead-duck president, stripping him of any remaining policy momentum, much of which he had already lost,” said Kim Hyung-joon, a political science professor at Myongji University in Seoul.

More: Beijing’s call for “common prosperity” cools down property prices in major cities, emerging markets

Since coming to power Moon can lay claim to some impressive feats. He brokered three meetings between Donald Trump and Kim Jong Un and led one of the most successful responses in the world against the coronavirus pandemic in 2020. But most voters seem more concerned about having a roof over their head than any possible outbreak of nuclear war.

In a Gallup survey published in July, Moon’s real estate policies were cited as the top concern among the 51 percent of respondents who disapproved of him.

Acknowledging the public’s anger in the wake of his party’s defeat in April, Moon said the government needs to modify some of its policies, including mortgage regulations and tax hikes, to help those without houses or single home owners.

More recently, his Finance Minister Hong Nam-ki said stabilising home prices was the government’s biggest public welfare policy goal as plans were announced to add more than 132,000 new homes in Seoul through 2028.

Whether that will be enough to convince voters remains to be seen. Already the president’s rivals are looking to exploit the situation with some offering travel vouchers, seed money for business investment, rent subsidies and a “basic housing” policy in which the government would provide cheap and long-term rentals.

Unless Moon can top that, come election time he might end up joining the millions of others in taking the first daunting step to looking for a new residence.

The original version of this article appeared in Issue No. 168 of PropertyGuru Property Report Magazine.
Write to our editors at [email protected].