Myriad of apartments stand like folding screens in Unjeong new city in Paju, Gyeonggi Province, in this November 2020 file photo. Yonhap
During the Chuseok holidays this September, a popular Korean film titled "Concrete Utopia" aired on television. The story revolves around an apartment complex called "Hwanggung," which stands intact in Seoul after a devastating earthquake levels the city. In the dark and gloomy city, residents of Hwanggung as well as those who gather around the apartment for food and shelter, all struggle to survive. The film's title is an ironic question, in fact, asking us if apartments can truly provide a utopian living environment.
The message of the 2023 film resonates with the people of Seoul, where rows of apartment buildings stretch from east to west along the Han River, resembling the jagged slopes of the mountains for which Korea is famous. In Korea, apartments make up roughly 64 percent of the housing stock in a country with a population of 51.77 million, according to 2023 data from the Statistics Research Institute.
This percentage highlights the overwhelming popularity of apartments in Korea, as reflected in the recent record-breaking prices recorded in Seoul. Additionally, there is growing concern that the widening social divide will further alienate people who are looking to buy a property. Statistics show that many apartment buyers in the first half of the year were in their 30s and 40s.
One such buyer, a 36-year-old surnamed Lee, who works in Seoul, understands this too well. He purchased an apartment four years ago just as he was preparing to marry his fiance.
"As a non-homeowner back in 2020, when the house prices rose exorbitantly, I felt nervous, and I decided to purchase one," Lee said. He identified that those in their 30s and 40s were at a stage in their lives where they were settling down, and the need for a home intensified. However, Lee pointed out that the fear of missing out can also play a significant role.
"The sense of competition is strong in Korea, and regular people have seen how their peers started out with an apartment and amplified it over decades ... so there is a strong tendency to think that purchasing an apartment is the key to having a secure living environment as well as an investment asset," Lee said.
The Korea Real Estate Board found that Seoul apartment prices in August rose 1.27 percent over the previous month. The 1.27 percent increase marks the highest rise in 71 months. The last time Seoul apartment prices experienced a similar increase was in September 2018, when they rose by 1.84 percent.
The price per apartment unit was exorbitant in some cases. The Ministry of Land, Infrastructure, and Transport announced in its public data on real-price transactions that, as of September this year, 14 apartments sold for over 10 billion won or more (approximately $751 million) each. The figure is a three-fold increase over the five units that were sold in the market at over 10 billion won last year.
A redeveloped, newly built apartment of about 84 square meters in Banpo-dong recently made headlines when it sold for 6 billion won in August. The 84-square-meter apartment features one of the most popular layouts favored by Korean families, typically offering three bedrooms and two bathrooms. The average price for an 84-square-meter apartment in Seoul is 1.04 billion won.
Forecasts for future prices remain mixed.
"It's always been an uncertain market, as supply does not meet demand," said Park Won-gap, senior real estate analyst at KB Kookmin Bank. He cautiously forecast that prices, especially for high-end or apartment units in affluent areas along the Han River, will continue to rise.
Professor Kwon Dae-jung, an expert in real estate studies at Sogang University, anticipates that prices will remain stagnant for the time being, as the government implemented stricter mortgage loan guidelines on Sept. 1, leading banks to be more hesitant in issuing new loans. The government enforced the second phase of debt service ratio rules, implementing higher stress rates when determining loan limits in the capital region. These rules dictate that a borrower's annual debt payments must not exceed 40 percent of their income.
Nevertheless, challenges to maintaining a stable housing market persist, including low supply, strong demand for apartments, and the potential for a rate cut in Korea following the U.S. Fed's "big cut."
"Firstly, there isn't a sufficient supply of available apartments. And once you own an apartment, it can be redeveloped into high rises, meaning it will rise in value as an asset," Kwon said.
Park saw the demand stemming also from so-called "apartment kids."
"Children who grew up in these apartments will likely be future buyers with a different sense of housing space. These so-called 'apartment kids' in their 30s and 40s prefer to purchase apartments over land or commercial buildings," Park said.
Since the construction of multi-unit buildings began in 1958, Korean apartments, unlike those in Europe and the United States, were keenly occupied by middle-class families in the 1980s. Before that, Korean families lived mostly in houses or modernized hanok-style houses. Over the past few decades, apartments in Seoul have developed significantly alongside the growth of the Korean economy. The recently built high-end apartments in Hannam-dong and southern Seoul feature "gated" facilities, with some having actual gates and others offering community amenities like gyms and cafeteria
Park sees the ubiquitous popularity of apartments in Korea as a combination of various factors.
"Apartments streamlined the movement of women who did most of the housework," Park said.
A scene from the film "Concrete Utopia" depicts the cruel battle between the owners and non-owners of an apartment in the aftermath of an earthquake. Courtesy of Lotte Entertainment
Kwon predominantly cited convenience and safety as its allure. Interestingly, an old black-and-white video resembling a public promotional clip from the film "Concrete Utopia" features a housewife stating that she heard that the apartments were very convenient to live in.
Moreover, the media's sensationalized use of terms like "lotto" or "lottery" when new apartments hit the market may be contributing to the instability of the housing market.
"I think there tend to be more news articles on real estate focusing on certain areas like Seocho-gu or Gangnam-gu because those will bring in more readers," said Choi Yoon-jung, professor of communications at Ewha Womans University.
"But when we think about the real needs of would-be house or apartment owners, it would help the readers more if these articles could offer an average price throughout Seoul including Mapo-gu, Nowon-gu and Gangbuk-gu as well," she said.
High housing prices present a persistent challenge for policymakers as well.
The Bank of Korea (BOK) is facing a dilemma over the correlation between a lower interest rate and higher apartment prices, as it considers cutting its 3.5 percent benchmark interest rate. The severity of the dilemma was well illustrated in BOK Gov. Rhee Chang-yong's recent remarks in an interview with The Financial Times. He said that Korea may well need extreme measures such as putting in place a quota or cap on admitting the number of students from the Gangnam area to prestigious universities in order to curb apartment prices in Seoul.
"In northern parts of western Europe, there is a consensus that housing has a social value, a perception that housing is a social infrastructure. To that end, the government supplies public housing and policies that make it easier to rent and own a home. Korea, instead of regarding apartment as a commodity, needs to go toward that route as well," said Park Mi-seon, a research fellow at the Korea Research Institute for Human Settlements.