How Koreans' 'one smart home' mentality distorts the housing market

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How Koreans' 'one smart home' mentality distorts the housing market

Published: 24 Jun. 2025, 00:05

Audio report: written by reporters, read by AI

Kim Jin-yoo

The author is a professor of Urban and Transportation Engineering at Kyonggi University and a president of the Korean Association for Real Estate Analysis

A colleague from the Chungcheong region recently asked for advice on buying an apartment in Seoul’s Gangnam District. In his mid-50s and nearing retirement, he wasn’t seeking housing for his children’s education. His interest was purely investment-driven. He expressed frustration that while his apartment in Chungcheong had barely doubled in value over two decades, a comparable apartment in Gangnam had appreciated tenfold.

Notices advertising apartment listings are posted at a real estate agency in Gangnam District, southern Seoul, on May 12. [NEWS1]

His question reflects a growing imbalance in Korea’s real estate market. Apartment prices in Seoul have risen for 20 consecutive weeks, reaching their highest rate of increase since September 2018. Meanwhile, housing oversupply in regional areas remains unresolved. A sharp drop in housing permits and construction starts over the past three years — 30 to 50 percent below the previous decade’s average — is now manifesting in market trends.

What explains the persistent unsold inventory in the provinces despite similar supply reductions? The core issue lies in Korea’s rigid “one household, one home” policy. The prevailing logic — that owning multiple homes amounts to speculation — has led to unintended consequences. If people are allowed to own only one home without facing tax penalties, they naturally gravitate toward the most profitable option. In most cases, that means choosing a single high-value property in Seoul, especially in Gangnam.

This file photo shows apartment complexes in Seoul. [YONHAP]

This behavior fuels disproportionate demand for what Koreans call “ddol-ddol-han han-chae,” or one smart home. Demand for other properties drops, especially in regions outside the capital. Those homes, mostly unsold, then appeal only to first-time buyers — an increasingly limited pool. The result: falling regional home prices, rising vacancies and further reluctance from construction companies to build outside the greater Seoul area.

The consequences ripple outward. As regional projects dry up, construction-related jobs decline. According to the Korea Employment Information Service, 1.5 million new jobs — half of all new employment over the past decade — were created in Seoul’s satellite cities. The connection between housing investment and local economies is clear. If the housing market stalls, job losses follow.

Still, the “one household, one home” ideal is unrealistic. In 2023, Korea’s homeownership rate was about 60 percent. Around 40 percent of households rent, but public housing covers only 9 percent of the market. That leaves about 31 percent of households — roughly 7 million families — renting from private landlords, most of whom are multiple-homeowners.

No country in the world has a 100 percent homeownership rate, nor does any aspire to it. The one-home policy is not only impractical but also counterproductive. To move forward, Korea must revise its perception of multiple-homeowners.

Not all second-homeowners are speculators. Many are practical investors or future retirees. A Seoul homeowner who buys another property in a provincial town might be planning a future relocation or seeking a second home for weekend use. These buyers stimulate local housing markets, support construction jobs, and help prevent population decline.

To encourage such investment, policymakers should consider incentives rather than penalties. For example, Singapore offers tax breaks on primary residences while applying targeted restrictions to speculative behavior. Korea could benefit from a similar model, differentiating between genuine investors and speculative buyers.

Tax policy also needs reform. Property ownership taxes — both holding and capital gains — should be based on the total value of owned properties, not simply the number of units. It is inequitable and economically irrational for a person who owns several low-value rental units in the provinces to pay more in taxes than someone who owns a single high-end apartment in Gangnam worth billions of won.

Villas and small homes are seen in a neighborhood in Seoul on Dec. 17, 2024. [YONHAP]

The storm brewing in the real estate market is real. A severe housing shortage in the capital and years of misaligned demand have created a dangerous imbalance. The Seoul area faces volatility and rising costs, while the provinces suffer from disinvestment and demographic decline.

It is time to move beyond the one-home dogma. The government must urgently shift policy to encourage multiple-homeownership in regional areas, channel capital outside Seoul, and restore vitality to local housing markets. Doing so is not about rewarding the wealthy, but about preserving balance, growth, and opportunity across the country.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.