Korea’s property woes could turn the tide in byelection
South Koreans’ anger over soaring house prices and gaping wealth inequality is fueling support from opposition candidates in the by-elections seen as crucial to sustaining the momentum of President Moon Jae’s economic agenda. in.
As an overheated housing market has become a global phenomenon from Australia to Canada Amid a flood of stimulus measures, its political implications are expected to materialize in Korea on Wednesday when voters head to the polls in mayoral elections in the capital Seoul and the south port of Busan.
As Moon’s popularity continues to hit new lows, the loss of the two key cities to opposition candidates could mark a turnaround against Moon’s flagship economic policies, including his plans to increase the economy. public employment and pressure for higher tax spending as he enters his final year in office. .
The discontent centers on the lack of affordable housing despite Moon’s promise to deliver more when he is elected in May 2017. Apartment prices in Seoul have doubled in the past five years, while Korean wages have risen by less. by 20%, leaving housing in the capital beyond the reach of many people and some of them in the hands of a few speculative people.
Moon has taken dozens of measures to curb gains, only to see some backfiring and prices in Seoul rise further during his tenure. Adding to the discontent are allegations that dozens of civil servants managing land holdings may have used inside information to profit from the city’s development projects.
Polls conducted ahead of the blackout show that the conservative camp’s Oh Se-hoon is on the verge of a landslide victory over ruling party heavyweight Park Young-sun in Seoul.
Average monthly company salaries were 3.5 million ($ 3,092) earned last year. This compares to an average apartment price of 1.09 billion won ($ 970,000) in March, up from 607 million won in May 2017, according to prices compiled by KB Financial Group.
While the housing squeeze is most acute in the capital, where prices rose another 13% in 2020, it is also playing out nationally, with apartment prices across the country rising 9.7%.
Korean households owe more money than ever as they rush to buy a home before prices rise even more. Their debt now stands at 175.5% of disposable income. The rise was fueled by mortgages to buy or rent homes, despite the government’s strenuous efforts to make it harder to take out loans to reduce speculative investment.
If household loan rates rise only 8 basis points, it could increase interest payments by 416 billion won, about half of which would come from home-linked loans, according to the Bank of Korea.
The problem extends beyond oversized mortgages to large deposits that people need just to rent a house. Tenants have to take out loans to cover so-called jeonse deposits that allow them to live in a unit for a period of two years or more, often without monthly payments.
By racking up lump sums of up to two-thirds of a property’s price, tenants essentially borrow to provide homeowners with free loans to invest more.
Park tried to voice his dissatisfaction with Moon’s real estate policy and distance himself from the president, whose approval rating hit a record low of 32% on Friday. She called for more public ownership of housing estates.
Meanwhile, Oh criticized Moon’s party for tightening redevelopment regulations and limiting the number of building permits over the years, saying the attempt to curb private builders’ earnings has backfired.