[Insight & Opinion] Expectations for the New Administration on the Real Estate and Stock Markets

Polarization Fueled by the "One Smart Home" Strategy
Asset Diversification Is Key:
Commercial Act Amendment and Dividend Promotion to Reduce Real Estate Concentration

Seoul apartment prices are showing alarming signs. On a weekly basis, they have recorded the largest increase in ten months. There is talk in the market that the supplementary budget and anticipated interest rate cuts have already been factored in, stimulating market sentiment. Most people are living under economic hardship. Those who live frugally and save money can only sigh as apartment prices soar by hundreds of millions of won.

As of 2024, there are about 2 million self-employed people aged 60 or older, accounting for 35% of all self-employed individuals. Their five-year business closure rate reaches 72%, which is far higher than the overall average. This means that self-employment has become the last line of survival for the elderly. Among younger generations, there is a growing trend of avoiding self-employment. For the first time ever last year, the proportion of self-employed among all employed people fell below 20%. If the proportion of the self-employed is decreasing, why are they still struggling to make money? The problem arises because consumers lack spending power, leading to weak domestic demand. Another major reason is that the rate of wage increases is outpaced by inflation, so the real purchasing power of nearly 21 million wage earners has declined.

It is also true that the rise in Seoul housing prices outpaces wage growth, leaving people with less disposable income after paying off loan interest. Both self-employed individuals and the majority of workers are becoming poorer. Isn't it time to reconsider what measures should be taken?

First, the 'one smart home' policy, which has fueled asset inequality, needs to be addressed. Amid a shortage of new supply in Seoul and worsening regional polarization, uncertainty is growing, and the choice of owning 'one smart home' is emerging as the core of financial strategy more than ever. The problem is that the government was the main driver of this phenomenon. Is it desirable that the proportion of people buying Seoul apartments who do not live in Seoul has reached an all-time high? Why must demand concentrate on a single expensive property? Since owning multiple homes brings little profit due to heavy capital gains taxes, people focus on one high-value property to maximize capital gains. Is it desirable for the government to have created this situation, which is rarely seen in other countries? The current administration must correct the mistakes of the previous one. Only then can regional areas and neighborhoods like Nowon, Dobong, and Gangbuk survive.

Second, vacancy rates are on the rise in the commercial real estate market, especially in medium and large retail spaces. Due to the economic downturn and reduced consumption, the commercial real estate industry is expected to face a prolonged period of recession. The knowledge industry center market is also stagnating, suffering from high vacancy rates. Recovery is even more difficult for some knowledge industry centers that have restrictions on business types. The new administration must explore various ways to overcome this crisis.

Third, the new administration has announced a pledge to usher in the 'KOSPI 5000 era.' This is a welcome move as it will help disperse wealth concentrated in real estate. The government has promised to eradicate unfair practices such as stock price manipulation and controlling shareholders' pursuit of private interests, as well as to amend the Commercial Act and introduce spot Bitcoin exchange-traded funds (ETFs). Of course, the stock index cannot rise without corporate profit growth, but the government must take concrete steps to reduce the so-called Korea Discount.

It is especially important to restructure the stock market based on criteria such as business performance, liquidity, and corporate governance, and to apply listing maintenance requirements suited to market characteristics. Rather than allowing the nation’s wealth to concentrate in a single smart home and deepen asset polarization, efforts should be focused on preparing dividend promotion policies so that people can earn living expenses from stocks. In this sense, the Commercial Act amendment proposed by the current administration is an extremely important task. I hope that our stock market will flourish, allowing many to enjoy wealth and dispersing the wealth currently concentrated in one smart home.

Wonkyung Cho, Professor at UNIST and Director of the Global Industry-University Cooperation Center