[How Is Your Dream] The Despair of the Homeless... "I've Become a Sudden Pauper"

2021 New Year Project - ① Real Estate as Desire or Frustration

Government Policy to Control Housing Prices
Homeless Tenants Who Trusted It
Youth Facing 'Panic Buying'

Pre-sale Market Turns into a Lottery
Benefits Concentrated on Certain Groups
Growing Intergenerational Conflicts

Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Lee Chun-hee] The domestic economic trend is expected to draw a clear 'K'-shaped polarization curve with 2020, the year scarred by the novel coronavirus infection (COVID-19) crisis, as a turning point. The prevailing view is that the upper income and asset classes will experience a rapid and strong recovery, while the lower classes will head sharply downhill.

Meanwhile, the life-cycle tasks lined up before us are becoming 'dreams' that are hard to reach no matter how hard we try. The self-deprecating term 'byeorakgeoji' (sudden pauper), which refers to those who suddenly fell into destitution despite their efforts, indicates a form of relative poverty different from the past.

Accordingly, Asia Economy diagnoses the challenges our society must solve this year, such as real estate, jobs, childbirth, self-employment, and education, through the project '2021, How Is Your Dream?' and seeks countermeasures.

'Byeorakgeoji' (sudden pauper) was a representative term for the real estate market last year. The soaring house prices over 3 years and 7 months since the Moon Jae-in administration made homeowners 'byeorakbuja' (sudden rich). On the other hand, non-homeowners who trusted the government's policy to "stabilize house prices" call themselves 'byeorakgeoji' due to the increasingly distant dream of owning a home.

The despair surrounding housing is not just a story of a specific generation. Young people who have just taken their first step into society express frustration that they may never be able to own a home even if they work their whole lives. Middle-aged people who postponed home purchases, believing that the government's strong policies would lower house prices, are also venting their anger at soaring jeonse (long-term lease) prices.

The government's price control on apartment pre-sale prices, aimed at curbing house prices, has turned the apartment pre-sale market into a 'lottery' enjoyed by a few cash-rich individuals and triggered panic buying among young people, creating a vicious cycle that further stimulates already soaring house prices.

Once Sold, Can't Buy Again

Let's look at the case of office worker Choi (47). He sold an apartment in Seongbuk-gu, Seoul, at the end of 2018 for 850 million won. It was a time when there was talk that "only house price declines remain" due to the government's strong measures. His plan was to live in a jeonse for a while and buy a better-located apartment if prices fell further.

The apartment he sold later dropped below 800 million won. There was little buying interest, as people thought prices might fall further. Choi, who rented a jeonse in a nearby new apartment with the money from the sale, thought his choice was right at that time.

Two years later, his situation has completely reversed. Choi says, "If I could go back two years, I would never sell my house." The apartment he sold recently surged to 1.2 billion won. The jeonse market price of his current home, with a lease contract expiring two years ago, has now become roughly equal to the price of the apartment he sold two years ago. Thanks to the lease renewal right system, he extended the contract with only a 5% increase in jeonse price, which is a small consolation.

Although the immediate crisis is averted, he remains anxious. He does not know how much more jeonse prices will rise when the contract expires in two years. Choi laments, "I have a short period of being non-homeowner, so I can't even dream of applying for housing subscription, but house prices seem to only go up. I'm worried that I will forever be a 'byeorakgeoji' without ever being able to hold onto a home."

Homeownership Now Only Possible in Dreams

The young generation is also suffering from despair. Another representative term for last year's real estate market was 'cheongpojok' (subscription abandonment group). In speculative overheated zones like Seoul, all general supply for apartments under 84㎡ (exclusive area) is allocated by a point system, pushing the winning cut-off scores higher. Popular complexes have cut-off scores as high as 69 points, the maximum for a family of four, making winning general supply subscriptions virtually an 'unscalable wall' for household heads under 45.

Kim (30), who recently got married but is still legally unmarried, says it is because of housing. He explains, "We don't have money to buy a general apartment right now, and we thought it would be difficult to win a subscription through general supply." The couple decided to register their marriage after having a child, thinking that the only way to own a home is through the special supply for newlyweds, which increases chances with shorter marriage duration and more children.

Youth who became 'cheongpojok' resorted to so-called panic buying through 'youngkkeun' (borrowing all possible funds). Shin (33) bought an apartment on the outskirts of Guro-gu last September. Originally, he and his husband rented a jeonse near their workplaces in Gangnam, Dongjak-gu, but fearing they might never own a home if things continued, they gathered all available funds and hurriedly bought a house. He said, "Even though commuting became harder, the pressure that we might not even be able to rent in Seoul was intense. Now that I have my own home, I feel relieved."

In fact, the age group that bought the most apartments in Seoul last year was people in their 30s. According to the Korea Real Estate Board on the 4th, the total number of apartment sales transactions in Seoul up to November last year was 85,020. Transactions by people in their 30s accounted for 27,984 (32.9%), the highest proportion. This is why the government proposed increasing special supply quotas and easing income requirements to suppress panic buying by people in their 30s.

Government Measures That Divided Society

The real estate issue shook South Korea in 2020. Contrary to President Moon Jae-in's confident declarations about having control over the real estate problem, it was a year marked by growing public dissatisfaction over homeownership. The government announced 24 policies to curb the volatile housing prices, but each time, prices rose even further. Guryong Village, the last shantytown in the Gangnam area of Seoul, stands in stark contrast to the dazzling high-rise apartments. In the New Year of the Year of the Ox, there is hope for stabilization in the housing market. Photo by Moon Ho-nam munonam@

However, real estate policies focusing benefits on the young generation sparked intergenerational conflicts. Middle-aged and older people who have lived as non-homeowners for a long time have continued to oppose. They argue, "We maintained non-homeownership for a long time according to government policies but received no support then, and now benefits are given only to the young generation." The government's patchwork real estate policies without comprehensive measures have only fueled generational conflicts.

The real estate problems caused by rising house prices are likely to worsen. Most market participants expect house prices to rise further this year. The sales price expectation index compiled by KB Kookmin Bank recorded 124.5 as of last month, the highest since the bank began compiling the statistic in April 2013. This index quantifies real estate agents' outlook on apartment prices over the next three months; a value above 100 means more expect prices to rise.

The Bank of Korea's housing price expectation index also hit a record high. According to the Bank of Korea's 'December 2020 Consumer Sentiment Survey,' last month the Housing Price Expectation Consumer Sentiment Index (CSI) was 132, the highest since the survey began in 2013. This index also means that more people expect housing prices to rise when above 100. Especially, the housing price expectation index for those under 40 reached 137.

Professor Kwon Dae-jung of Myongji University's Department of Real Estate said, "Last year was close to being a 'country of real estate'." He pointed out, "The government's continuous regulations only resulted in raising real estate prices and deepening social conflicts." Professor Kwon diagnosed, "As capital gains widen, conflicts between ordinary people and the wealthy will intensify, and the middle class will disappear, causing polarization. House prices are likely to continue rising this year, so this 'country of real estate' phenomenon is expected to persist."

◆ Series Order

① Real estate as desire or frustration

② Young people who can't work, middle-aged who can't quit

③ A country where having children is difficult

④ Self-employment on the edge, no way out

⑤ Educational inheritance, the useless 'gabunggae' (mongrel dog)