[Inside Chodong] Polarization and Asset Inheritance Triggered by Apartment Shopping

Unsold Homes Reach Decade-High Nationwide,
Gangnam Apartment Prices Double in Five Years
Echo Generation Increasingly Dependent on Inheritance and Gifts

For Korea's middle class, which experienced a period of rapid economic growth, real estate investment was a wise act. Whether it was an investment or speculation is subject to individual judgment, but at least it was seen as efficient for growing assets. The sale price of the 30-pyeong unit at the Third Hangang Bridge Hyundai Apartment (Apgujeong Hyundai Apartment) in 1975 was 8.65 million won. The transaction price reported earlier this month was 4.3 billion won, meaning it increased about 500 times over 50 years. In 1975, the real gross national income per capita was 3.73 million won, and the first domestically produced car, the Pony, released around the end of that year, cost about 2.29 million won. It also became common to hear that housewives who actively visited land sites were considered more resourceful than their diligent salaried husbands.

Real estate investment (or speculation), which had existed since the Japanese colonial era, spread to the middle class in the 1970s. Until then, real estate was almost the exclusive domain of a few landlords or power holders who had access to secret development information. From the 1970s, oil money earned from the Middle East construction market flowed in, and as national industrial promotion policies began to take effect one by one, the middle class also actively joined in.

A scene from a drama set in the 1980s, produced a few years ago, shows a glimpse of this era. The protagonist's family, living in a semi-basement due to a bad guarantee, advises a nearby neighbor who suddenly came into a large sum of money to buy an apartment in Gangnam's Eunma Apartment complex. The neighbor, a bank employee, says that the deposit interest rate is only 15%. This reflects a time when low risk and high return, combined with tenant deposits, made it possible to aim for home ownership without a substantial initial fund.

The widespread adoption of apartments as a housing form also played a role. The increase in demand and supply of apartments was not because they offered a more convenient lifestyle. Apartments made houses perceived as standardized products, enabling more active turnover. Knowing which apartment in which area and what type quickly reveals the market price. Frequent transactions drive prices up. I believe this convenience in trading significantly influenced the value system regarding asset accumulation. Apartments simultaneously served as living spaces, tangible assets, and financial assets capable of steady price appreciation through continuous trading. The perception that profits gained from rising land values were unearned income and thus bad also faded.

As the middle class, which makes up the majority of community members, became directly or indirectly involved in real estate investment, the spatial hierarchy of Korean society today has become more intricate. The metropolitan area is separated from the provinces, and within Seoul, Gangnam and Gangbuk are divided. Apartment complexes are distinguished, and even within complexes, prices vary by building arrangement or floor. Administrative districts or geographical differences translate directly into asset value differences. One of the recent prominent phenomena resulting from this trend is polarization. Unsold houses have increased to the highest level in about ten years, not only in the provinces but also in Seoul. Meanwhile, in Gangnam, Seoul, prices per pyeong (3.3㎡) doubled from 100 million won to 200 million won in five years.

Housing price polarization should not be dismissed simply as a trend. While the baby boomer generation purchased and accumulated real estate assets based on earned income, research (Korea Research Institute for Human Settlements’ “Measures to Alleviate Real Estate Asset Inequality for Social Integration”) shows that the echo generation, their children, rely more on inheritance, gifts, and loans. This means that as assets are passed down, the asset gap between classes widens and hierarchy becomes more entrenched, with real estate having a greater impact than other assets. A rigidly stratified society is unfortunate in itself. Who can solve this? The answer is not easy.

Choi Dae-yeol, Construction and Real Estate Department

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