Kim Yong-beom, head of the Presidential Policy Office, stated that a "desperate solution" is needed for the real estate issues in the metropolitan area. He described the influx of money into real estate as the "worst" scenario. His concerns are valid. With a current account surplus and rising corporate profits, money is flowing into South Korea, but if it is concentrated in certain real estate markets in Seoul rather than being directed toward productive investments or regional industries, the Korean economy could once again be hindered by rising housing prices.
However, the challenge lies in finding a solution. If the government prioritizes supply again, it will not be sufficient. While supply is necessary, discussing price stabilization without addressing the need for quality housing in Seoul and the metropolitan area is unrealistic. Moreover, increasing supply takes time; finding land, obtaining permits, and completing construction can take years. The current market is driven by today's anxieties and tomorrow's expectations. It is naive to believe that merely announcing supply plans will curb speculative demand and the concentration of demand in Seoul.
The essence of South Korea's real estate problem is not simply a lack of housing. The issue lies in the concentration of all opportunities in Seoul, where education, jobs, culture, and wealth accumulation are all funneled into the real estate market. The belief that one must live in Seoul to succeed and the conviction that entering affluent areas like Gangnam, Myeongdong, and the Han River belt is the only path to upward mobility support the market. Unless this belief is dismantled, any supply measures will ultimately fuel price increases.
Therefore, the solution must directly target demand. Taxation, loans, holding costs, rental systems, and regional industrial policies should be bundled into a comprehensive package. The social costs associated with owning multiple high-value properties should be increased, while ensuring housing stability for genuine residents. At the same time, the institutional benefits that make real estate the safest and most advantageous investment should be reduced. Without changing the reasons why money flows only into Seoul's real estate, price stabilization will remain a mere slogan.
More importantly, sustainability is crucial. Real estate policies have often been strict in the early stages of a government but waver as elections approach. When prices rise, the focus shifts to supply, and when transactions slow, discussions of regulatory relaxation emerge, instilling incorrect lessons in the market. The market is more persistent than the government. When the government introduces short-term measures, the market waits for years for relaxation. What is needed is not one-off measures but long-term signals. The direction to reduce the concentration in Seoul and lower expected returns from real estate must be maintained beyond political terms and elections.
Supply must also align with these principles. An indiscriminate "supply at all costs" approach is dangerous. Key questions include where, for whom, at what price, and alongside what transportation and job plans will the supply occur. If expanding supply in central Seoul leads to another lottery-style allocation and stimulates surrounding prices, it will be a policy failure. Supply that merely fills numbers in the outskirts of the metropolitan area will not alleviate the concentration in Seoul. Supply must be designed alongside demand dispersion.
As Kim stated, the influx of money into real estate is the worst scenario. However, to prevent this worst-case outcome, we must move beyond familiar supply prescriptions. As long as good jobs, schools, hospitals, and cultural infrastructure are concentrated only in Seoul, demand will not easily diminish. Real estate policy must serve as housing policy while also functioning as industrial policy, educational policy, and balanced development policy.
If the government is truly desperate, it must send a clear signal to the market. Investments relying on the myth of invulnerable Seoul real estate will no longer be protected by the state. Supply should be increased, but the illusion that supply alone can solve everything must be discarded. To ensure that the awareness of real estate issues does not remain just talk, what is now needed is decisiveness and sustainability.
* This article has been translated by AI.
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