Where are the Bubbles? South Korea Edition

Reuters: S.Korea to tighten property curbs as home prices surge

The median apartment price in Seoul was 920 million won ($759,873) as of May, having increased every month so far this year through the course of the coronavirus outbreak. They are up about 52% since Moon took office in 2017.

Bloomberg: South Korea Urges Officials to Sell Their Second Homes as Prices Fuel Anger

Prime Minister Chung Sye-kyun, a Moon appointee, urged high-level officials Wednesday to sell such properties as soon as possible. The demand comes after rising discontent over prices prompted fresh scrutiny of the property holdings of senior Moon administration officials, including his chief of staff.

“If high officials own multiple properties, it is difficult for us to earn trust from our people,” Chung told a meeting of top government officials. “High-level officials must set an example. To be honest, we should have done this a lot earlier.”

Home prices have continued to surge in some parts of the country, despite a series of property-related measures launched by Moon since he took office in May 2017. Moon pledged an “endless” stream of steps in January, after earlier moves -- including higher property taxes, tighter lending rules and limits on using mortgages to buy apartments -- failed to stop the rise.

Reuters: Lost Seoul: South Korean middle-class dreams spoiled by soaring house prices

Even with unemployment spiking as the coronavirus pandemic swept South Korea in February, Baek Seung-min asked his wife to quit her nursing job to help reach a dream they had spent a lifetime chasing: buying their own apartment.

The 35-year-old interior designer said giving up his wife’s 58 million won ($48,000) salary would improve their chances of securing a property after the government introduced a host of measures aimed at cooling rampant property prices.

The unusual plan was to cut his wife’s income for a while so the couple’s annual earnings were low enough to be eligible for a quota system in new property developments designed to give more low-income newlyweds access to housing.

Even so, Baek and his wife decided to settle two hours west of his Seoul workplace in Incheon, where borrowing rules were looser and apartments far cheaper.

“Seoul home prices grew way out of reach, we had to go all the way to Incheon to buy our place,” Baek said. “The government is crushing our dreams when they curb loans and tell us not to buy homes, it enrages me.”

Achyde: Persistent real estate inflation weakens South Korean President Moon Jae-in

Another cause of inflation is the so-called “Jeonse” system, specific to South Korea. In this context, the tenant does not pay rent, but pays a deposit of between 50% and 100% of the total price of the accommodation when moving in, which he recovers at the end of the lease, generally for two years, if he leave the accommodation. In the meantime, the owner has made the money grow, sometimes by investing in a new property.