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🇰🇷 South Korea /Economy & Trade

Beyond Seoul: Completing Sejong City to Solve Housing Crisis

From Hankyoreh · () Korean

Translated from Korean, summarized and contextualized by DistantNews.

At a glance

Opinion Named sources Context piece
  • Housing prices in South Korea, particularly in Seoul and the surrounding metropolitan area, are rising sharply, driven by a severe supply shortage and strong speculative demand fueled by "FOMO" (fear of missing out).
  • The government's efforts to curb price increases through land transaction permits and loan regulations have proven insufficient, as the limited supply of new apartments, especially in Seoul, continues to drive up prices.
  • The article argues that simply increasing housing supply in the Seoul metropolitan area is not enough and proposes completing the administrative capital, Sejong City, as a fully functional capital to create a new major hub and alleviate the concentration of demand in Seoul.

South Korea is facing a critical housing shortage, particularly in Seoul and its metropolitan area, where prices are surging to levels not seen in five years. The housing price outlook index has reached its highest point in over five years, with a significant increase in the number of people expecting prices to rise further. This speculative sentiment, amplified by a strong "fear of missing out" (FOMO), is proving difficult to control despite government interventions.

The housing price outlook index surveyed monthly by the Bank of Korea rose to its highest level in more than five years last month, with a significant increase in the number of people expecting prices to rise further. Prices and inflation are sensitive to expectations, and this trend is unusual.

— Article textDescribing the rising housing price expectations in South Korea.

Government measures, including designating large areas of Seoul and southern Gyeonggi Province as land transaction permit zones to restrict speculative investment and implementing strict loan regulations, have failed to cool the market. Even the suspension of capital gains tax deferrals and plans to increase property taxes for high-value homes have only caused temporary dips before prices resume their upward trend. The core issue is a "supply cliff," with Seoul's apartment supply expected to be half of the five-year average this year and further decrease next year. While the government speaks of "all-out supply," concrete solutions are lacking, as the impact of reduced construction starts in 2022 is now being felt.

Compounding the problem is the influx of "semiconductor money" into the market. The booming semiconductor industry has generated substantial profits and bonuses, increasing liquidity that is flowing into highly profitable sectors like stocks and real estate. This surge in demand, particularly in areas around semiconductor complexes, is further inflating housing prices.

The Seoul metropolitan area housing price is at a critical point. The average sale price of apartments in Seoul has risen 8.71% last year and 6.29% by the end of July this year.

— Article textHighlighting the severity of the housing price increase in Seoul.

The article argues that the current approach of solely focusing on increasing housing supply in the Seoul metropolitan area is insufficient. It contends that this strategy has historically only increased Seoul's gravitational pull, attracting more demand. Instead, it proposes a "reverse thinking" approach: creating new, large-scale hubs with the potential to rival Seoul's influence. The most viable option presented is the full completion of Sejong City as a fully functional administrative capital.

The main reason is the supply cliff. This year's apartment supply in Seoul is expected to be half of the average over the past five years, and next year it is projected to fall by another 30%.

— Article textExplaining the severe shortage of new housing supply.

Currently, Sejong City is only about one-third the size envisioned in its original plan. The original plan by the Roh Moo-hyun administration aimed for a complete relocation of the legislative, judicial, and administrative branches, including the presidential office, National Assembly, and Supreme Court. This ambitious project was curtailed by a Constitutional Court ruling, leaving only parts of the administrative branch relocated. The article advocates for completing this vision, arguing that a truly complete administrative capital would disperse the concentration of power and population in the Seoul metropolitan area, offering a long-term solution to the housing crisis and the "one-city" problem plaguing South Korea.

It is time to stop simply increasing housing supply in the Seoul metropolitan area. No matter how many apartments are supplied, price stabilization will only be temporary due to the overwhelming demand, and it is a long-standing rule that it only increases the Seoul metropolitan area's gravitational pull.

— Article textArguing against the sole reliance on increasing supply in the Seoul area.
DistantNews Editorial

Originally published by Hankyoreh in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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