Eight Years of Income to Buy a House in Metropolitan Area

A worker in the metropolitan area, encompassing Seoul, Incheon, and Gyeonggi-do, needs to save his entire income for an average of 8.1 years without spending a dime in order to buy a house. The national average is 6 years.

Those figures were released by the Korea Research Institute for Human Settlements (KRIHS) under the title of “The Actual Condition of Housing in 2006.” The report stated that the average housing price is 8.1 times greater than the average annual income of a worker in the metropolitan area and six times nationwide.

Previous research in 2005 by the same organization showed it was 7.7 times in the metropolitan area and six times nationwide, indicating that housing price in the metropolitan area has increased significantly.

KRIHS also released figures based on median annual income and housing price, saying, “Using average price as a standard can distort statistics as unusually high annual income and home prices are included.”

On the basis of median price, housing price is 5.7 times greater than the average annual income in the metropolitan area and 4.2 times nationwide. Those numbers are below the results based on the average price. But what is common is that workers in the metropolitan area need more time to buy a home.

The ratio of the average monthly income to the average rent is 25.3 percent in the metropolitan area and 22.9 percent nationwide, which are slightly lower than the results of 2005 (26.0 percent in the metropolitan area and 24.0 percent nationwide).

As of August to October 2006 (when the survey was conducted), the ratio of loans from financial institutions to housing price among home owners was 35.7 percent in the metropolitan area and 36.5 percent nationwide.

The average time required for a householder to buy the first house is 7.9 years in the metropolitan area and 8.1 years nationwide. The average size of the home (including rental home) is 67.3m² (20.4 pyeong).

The average housing assets for homeowners is 174.92 million won in the metropolitan area, 118.03 million won nationwide, and 79.06 million won in the five metropolitan cities excluding Incheon. The asset gap between the metropolitan area and the other areas reflects the price discrepancy. The high income bracket who earns over 3.01 million won monthly has 275.45 million won in housing assets, which is 4.9 times bigger than 56.07 million won of the low income bracket whose monthly gains are 1.5 million won or less.

jefflee@donga.com