South Korea’s land minister bearish on property as population ages

South Korea won’t see a repeat of the sharp home price gains it did in the past as its population fastly ages and economy moves at a tortoise pace, the nation’s land minister revealed, pledging to promote public rental accommodation to boost access to housing. “The population is ageing and the economy is picking up speed by just 2% to 3% every year. There is no way house prices will increase as they did in the past,” Park Sang-woo, minister of land, infrastructure and transport, conveyed in an interview with Reuters on Monday. “In the past, the economy grew by 7% to 10% every year, and there were two or three kids in each family. There will never be a ‘deja-vu’ of that for this generation.”

South Korea’s median house prices reached at a height in June 2021 after increasing 45% over five years, according to Korea Real Estate Board data. It has since fallen 19% following an aggressive interest rate cycle by the central bank. Still, South Koreans cite high housing costs as the hugest cause behind nose-diving births and marriages. The nation’s fertility rate, already the world’s lowest, reached a fresh record low in 2023. According to the ministry’s yearly survey, house prices in 2022 were 6.3 times higher than households’ yearly income, easing slightly from 6.7 in 2021. In the capital Seoul, however, the price-to-income ratio was 15.2, up from 14.1 a year earlier.

The government is putting its energy to give a more affordable housing. This year, it has rolled out cheap mortgages for newly weds who decide to have a baby. To restore work-life-balance in the wider Seoul region where 45% of population live, the government plans a high-speed underground rail network to connect less expensive housing markets in outskirts of Seoul to jobs in the city’s centre. Simultaneously, the government will give a greater range of long-term public rental homes through the corporate sector by easing regulations. It will also support young people invest in assets other than real estate, he conveyed.