High Kick to Local High-End Housing Prices... Residential Polarization Widens

Regional 'High-Price and Low-Price' Gap Deepens
Seoul→Capital Area→Regions Shift in Buying Demand
Rising Sale Prices Centered on High-End Homes in Regions

Regions and Low-Income Groups Face Increased Housing Burden from Seoul-Origin Speculation
Experts Say "Policy Direction Does Not Aid Social Stability"

[Asia Economy Reporter Moon Jiwon] The balloon effect resulting from the designation of real estate regulation zones appears to be intensifying polarization in local housing markets. In Seoul, panic buying by people in their 30s has caused a sharp rise in prices of mid- to low-priced homes, leading to an overall upward leveling of housing prices, whereas in local areas, prices are soaring mainly for high-end homes.

Concerns are emerging that the imbalance between Seoul and local areas, as well as between ordinary citizens and wealthy individuals within local regions, is deepening due to the side effects of successive real estate measures, making 'housing stratification' more pronounced.

According to KB Kookmin Bank's Real Estate Live On statistics on the 14th, the nationwide housing quintile ratio recorded 8.5 last month, the highest in about 11 years and 1 month since October 2009 (8.5). The quintile ratio is the value obtained by dividing the average price of the top 20% of housing prices by the average price of the bottom 20%, and a higher number indicates a greater price gap between high-end and low-end homes.

When the Moon Jae-in administration took office in May 2017, the nationwide housing quintile ratio was 5.1, and it recorded 7.1 in January this year. This means that housing polarization, which had shown a gradual upward trend, rose sharply this year.

This price gap between high- and low-priced homes is clearly evident only in the metropolitan area excluding Seoul and in local regions. Seoul's housing quintile ratio rose from 4.6 in May 2017 to 5.5 in January this year, then dropped back to 4.8 last month. This is because while demand for expensive homes slowed due to strengthened comprehensive real estate taxes and loan restrictions, prices of mid- to low-priced homes rose significantly. Young people under 30, increasingly anxious that it might be difficult to buy a home later, have gone all-in ("yeongkkeul") to purchase mid- to low-priced apartments on the outskirts of Seoul.

In contrast, Gyeonggi-do's quintile ratio jumped from 4.1 in January to 4.7 last month. This is interpreted as demand shifting to high-end homes in Gyeonggi-do, which are relatively cheaper and have better living environments compared to Seoul, as Seoul's jeonse (long-term deposit lease) and sales prices rose sharply this year. In fact, apartment prices in Gwacheon, Seongnam Bundang, Suwon, and Hanam have risen significantly since the beginning of the year, and after the expansion of regulated areas in May, the balloon effect intensified in places like Gimpo and Paju.

Doosung Kyu, a research fellow at the Korea Construction Industry Research Institute, explained, "In Seoul, there has been sufficient investment and loan regulations, so it is not easy to maneuver. Recently, investment has concentrated in local areas, and buying demand is shifting to competitive real estate such as medium- to large-sized, newly built, and luxury homes in central areas of Daegu, Busan, Ulsan, and Changwon."

In fact, Ulsan's quintile ratio rose from 4.8 in January to 5.6 last month, and Busan's increased from 4.8 to 5.9 during the same period. Similar trends were observed in statistics from the Korea Real Estate Board (formerly Korea Appraisal Board). Looking at the Korea Real Estate Board's quintile ratio, Seoul apartments decreased from 6.1 in January to 5.9 last month, while nationwide it rose from 10.9 to 11.9.

As housing prices in Seoul generally rise and polarization in local housing markets worsens, there is analysis that housing instability among ordinary citizens may accelerate. Research fellow Doosung Kyu pointed out, "In local areas, housing costs have surged in a short period, so low-income groups may feel frustrated that despite their hard work, housing burdens have increased due to trends that started in Seoul. This is a policy direction that does not help either the real estate market or social stability."

This content was produced with the assistance of AI translation services.