[4 Years of Moon Administration Economic Report Card] Apartment Prices Up 50%, Stock Market Up 40%... Asset Gap Widens

Comprehensive Housing Sale Price Index

Up 18.95% in 4 Years... More Than Twice the Previous Administration

Average Apartment Sale Price per 3.3㎡

12.55 million KRW → 18.87 million KRW

Stock Prices Also Soared Due to COVID-19

"Narrowing Asset Gap More Important Than Income Gap"

[Asia Economy Reporters Eunbyeol Kim, Onyu Lim, Sehee Jang] Over the past four years under the Moon Jae-in administration, housing prices and stock prices have skyrocketed. As real estate prices, which constitute the majority of assets for our citizens, have surged rapidly, the asset gap between the "haves and have-nots" is widening quickly. Feeling deprived, the younger generation is either barely managing to buy homes through loans or giving up on homeownership altogether and instead fervently investing in stocks or cryptocurrencies.

According to KB Kookmin Bank’s Liv Real Estate on the 7th, the KB Housing Sale Price Comprehensive Index (nationwide, monthly) rose from 95.9 in May 2017 to 114 in April 2021, an increase of 18.95%. This rise is 2.17 times greater than the 8.74% increase in the sale price index during the Park Geun-hye administration from February 25, 2013, to May 10, 2017. The increase during the Moon administration also surpassed the 13.09% rise seen during the Lee Myung-bak administration. Narrowing the focus to Seoul, the increase is even more pronounced. The comprehensive housing sale price index in Seoul jumped by 34.95% during the Moon administration, compared to 7.83% under Park Geun-hye and 1.96% under Lee Myung-bak, showing a particularly sharp surge in Seoul housing prices.

Real estate sale prices also surged. Since the start of the Moon administration, the average sale price per 3.3㎡ of apartments nationwide rose from 12.55 million KRW to 18.87 million KRW, a 50% increase. Especially in Seoul, where panic buying was concentrated among the 20s and 30s age group last year, prices jumped 85% from 23.22 million KRW to 43.04 million KRW. To purchase a medium-sized apartment of 84㎡ (exclusive area) in Seoul, an average of nearly 1.1 billion KRW is required.

Experts point out that the government’s regulation-focused policies have ironically led to the rapid rise in housing prices. While the government cites low interest rates, abundant liquidity, and household fragmentation as causes of instability in the real estate market, the core issue is the failure of over 20 policies. Regulations on private reconstruction such as the excess profit recovery system and strengthened safety inspections have led to severe supply shortages, while tightened loan regulations and tax increases targeting multi-homeowners have fueled demand for the so-called "smart one home," igniting housing prices in the metropolitan area. The new lease protection law, including the right to request contract renewal and rent ceiling system, intended to protect tenants’ rights, has instead worsened the jeonse (key money deposit) shortage and ultimately pushed housing prices higher.

Stock prices also rose significantly due to the COVID-19 pandemic. During the Moon administration, the KOSPI index increased by 40.04%, much higher than the 12.94% under Park Geun-hye and 17.61% under Lee Myung-bak. Typically, rising stock prices indicate good corporate performance and smooth capital raising, which are positive economic outcomes, but this time, the surge was driven by a rapid increase in liquidity worldwide due to COVID-19, so whether this is a bubble or not remains to be seen over time.

Economic experts agree that it is not a healthy economy when young people focus solely on asset investment amid sluggish job creation. Professor Donghyun Ahn of Seoul National University’s Department of Economics said, "In Korea, real estate prices have risen sharply, widening the asset gap, and stocks and Bitcoin have also increased. The gap between those who participated in asset investment and those who did not, as well as between those who originally had more or less wealth, is large." He added, "We need to reduce the asset gap rather than the income gap," and criticized, "Policy failures with misplaced focus have further widened the asset and income gaps." According to the Statistics Korea Household Finance and Welfare Survey, the asset gap between the 1st and 5th quintiles was 706.74 million KRW in 2017 but increased by 20% (137.51 million KRW) to 844.25 million KRW last year. The asset quintile ratio also grew from 6.7 to 7.2 during the same period.