It is an inconvenient truth that you would have to save 13.4 years of your annual salary to own a house of an average price if you earn an income of the average level. Chief Presidential Director on Policy Affairs Kim Soo-hyun said on Jan. 20 in a press conference that houses are priced too high compared to workers’ incomes, promising to implement policies aiming at housing price stabilization. His remarks may have reflected the realities in the housing market.
The price to income ratio (PIR) is the basic affordability measure for housing in a given area. The figure in Seoul is 13.4 times. Meanwhile, New York’s is 5.7 times and Tokyo’s is 4.8 times. The figure in Beijing is 17.1 times due to the recent spikes in housing prices. To be sure, it may make little sense to compare the figures of Seoul City, New York State and Tokyo Metropolis. However, housing prices are too high in Seoul any way.
Japan and Korea have a lot in common in terms of demographics and housing market realities. The Japanese government’s housing policy makes sure to stabilize housing prices so that workers can purchase a house with five years’ salary. As such, it is desirable to make sure working-class citizens and young people live with hopes of becoming a home owner in five years.
It is a hard-to-solve issue how to reduce housing prices particularly in Seoul even if social consensus has been built around. In fact, there have been several precedents where prices rather went up as the government only emphasized the need for price stabilization.
The current government has put in place policies primarily to increase the burden of owning high-end houses with the aim of cutting back on housing prices. In response, housing prices in Seoul have been on the decrease for 11 consecutive weeks. It may have resolved gaps in social classes. However, it has not made it easier for the middle working class to own a house if they cannot afford a higher tax. Reining in luxury house prices may be rendered meaningful. More importantly, it is worthwhile to shift care and resource to housing market stability for the middle working class.