Residential real estate defies all attempts to tame it

View of apartment in Seoul on Monday. The ratio of homeowners have shrunk as the value of housing units have surged in 2020. The latest study by Statistics Korea indicates more people now living in rents. [YONHAP]

The percentage of Korea's residences owned privately, as opposed to public housing, continues to shrink, and the gap between the most expensive and cheapest residences keeps growing.

According to Statistics Korea on Tuesday, there were 18.5 million residential units in Korea last year, up 2.2 percent compared a year earlier. Some 60 percent or 9.4 million were apartments.

Among residences, including houses and apartments, 16 million units were privately owned, up 1.8 percent over the year before. That is 86.2 percent of the total, a ratio that has been falling since Moon Jae-in took office in 2017.

In 2019, the ratio was 86.5 percent and at the start of this administration it was 87.4 percent.

The Moon government has tried from the start to bring down real estate prices. But all of its efforts, from tightening of loans to increasing taxes on property owners, have had the opposite effect from what was intended. Prices have risen even faster and finding affordable housing has become more difficult.

An increasing number of people living alone is another reason for a shortage of residential units.

There has been a sharper increase in people who no longer own residential units than those who buy their first homes.

Last year, according to Statistics Korea, there were 570,000 additional people who used to own a residence but currently do not, a 4.2 percent increase year-on-year.

For the first time since data started being compiled in its current form in 2015, the total number of families that don’t own a single residence surpassed 9 million.

During the same period, there were 980,000 people who became first-time homeowners, a 2.7 percent increase.

“Residence prices were up as the assessed value rose sharply,” said Cha Jin-sook, statistics agency official.

As part of its effort to tax real estate more, the government has been raising the ratio of market value in assessing the value of residences. In 2019, the assessed value was 68 percent of the market value, which rose to 69 percent in 2020 and 70 percent this year.

A shortage of apartments in cities with high demand such as Seoul has driven up prices as well.

The gap between the most expensive and the cheapest residences has widened further.

The average government assessed value for residences in the top 10 percent was 1.3 billion won. The cheapest 10 percent averaged 28 million won.

That as difference of 47 times.

In 2019, the difference was 40 times.

The gap widened mostly due to an increase in the value of the top 10 percent. In 2019, the average value was 1.1 billion won. That’s an 18 percent increase.

Whereas the cheapest 10 percent increased only 3.7 percent.

The Moon government hoped that owners of multiple residences would be forced to sell some. But its success has been limited.

Some 84 percent of homeowners only own a single home. Those that owns two or more accounted for 15.8 percent last year, compared to 15.9 percent in 2019.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]