Housing Crisis Grips Seoul Metro Area

Choi (36), who lives in a leased house of 32 pyeong in Dodam Village I-park, Jukjeon-dong, Yong-in City in Gyeonggi Province, had to renew his contract.

The lease for the apartment had risen from 80 million won to 120 million won. This is a rise of 40 million won. Only a month ago, the market price for a lease at the real estate office was 150 million won, but it has leaped by 15 million won. Other apartment flats in the area have also risen.

Choi says, “My wife’s parents, who live near us, take care of the children while we are both at work, so it was difficult for us to mover. There was noting we could do but renew the contract.”

With autumn, when many people move, coming up, leases are rising rapidly, leaving lower to middle class families in panic. It has also become hard to find a house out for lease.

The housing crisis, which began especially in the Seoul Gangbuk area, is widening to regions in Gangnam and Gyeonggi provinces.

The government has belatedly stepped forth to provide a countermeasure, but no solution other than increasing loans for lease has been prepared.

-The spreading housing crisis

Until the middle of last month, signs of the crisis showed up in the Gangbuk area of Seoul, but recently, Gangnam, Seocho, and Gwacheon city, Yong-in city in Gyeonggi province are also suffering.

According to the Ministry of Construction & Transportation, the amount for leases rose 0.6% in the 14 districts of Gangbuk during the month of August, making it higher than the rest of the country (0.2%). The rise in the whole of Seoul and Gyeonggi was 0.4%.

In this month, Seoul Gangnam, and areas of Gyeonggi also seemed unstable.

During a one-week period of September 4th to the 10th, the Mapo district in Seoul rose 0.3%, and Gangnam, Seocho, Eunpyeong, Nowon district have risen by 0.2%. It is not common for the leases to rise over 0.2% in merely one week. The government also regards the market as unstable in case the lease rises over 0.2% in a week.

Regions in Gyeonggi province seem even more insecure. Prices in Yong-in city have risen by 0.6 % during the same period, and the increase of the week before was 0.3 %. In Gwacheon city, which is currently lacking in housing due to reconstruction, also experienced a 0.4 % leap during the 4th to the 10th, and a 1.9 % increase in the week before.

-Is the increase for aid a short-term solution?

At the Economic Policies Settlement conference held on the 13th, presided by deputy Prime Minister and Minister of Finance & Economy Gwon Oh-gyu, the government decided to increase aid to destitute families from 1.6 trillion won to 2 trillion won.

If the head of a family who does not own a house, and receives an annual income of under 30 million won contracts a house in which the deposit money is less than 60 million won, he can receive a loan of up to 42 million won.

Also, a small income family who has the recommendation of municipal bodies can receive a loan of 35 million won when leasing a house with a deposit of less than 50 million won. The loans can be made through Kookmin bank, Woori bank, and Nonghyup.

Relevant authorities such as the Ministry of Construction & Transportation, and Ministry of Finance & Economy have also decided to execute an inspection of offenses of housing lease protection laws, such as lease contract cancellation request.

- Housing crisis, is it temporary, or systematic?

However, whether the government’s countermeasures will have effect is unknown.

For instance, to receive aid, the deposit must not exceed 50 million won (low-income family), or 60 million won (working-class family), but in the metropolitan area, deposits for housing usually exceed the limit.

The reason the government’s measures are so indifferent is because it sees the current crisis as a temporary phenomenon caused by frequent weddings and families moving.

Kim Yong-deok, vice-minister of Construction & Transportation, said, “The increase of lease for apartments in Seoul during July and August fall short of the lease for the same period during the last 20 years. As the market has become stabilized, the housing crisis will end soon after October.”

However, civilian experts see the crisis as a result of systematic change, and point out that a fundamental plan is needed.

Cho Joo-hyun, professor of the department of real estate at Konkuk University, said, “Because of the rising burden of property tax, and low interest rates, homeowners have turned from lease, to monthly rent, causing a shortage of houses for lease. Measures such as revitalization of small scale house rental businesses must be prepared so that the supply of houses for lease will increase.”

Representative of real estate consulting business RE-members, Goh Jong-wan, emphasized, “The diffusion rate of houses in the Seoul, Incheon and Gyeonggi region remain at 90%, while there is a steady inflow of inhabitants. This creates a high demand for lease. However, we must pay attention to the fact that the supply of housing has been decreasing since 2004.”

higgledy@donga.com sukim@donga.com