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By Mark Peterson
In my last article I wrote a semi-optimistic, semi-pessimistic piece about the new year. I was optimistic that it would be a post-pandemic year with opportunities. But I was pessimistic concerning Korea's population decline, specifically the trend of low marriage rates and the low birthrate. Subsequent to writing my article, in the Korea Times where my article was published, there was an article about government policies to increase population growth. The proposal, in effect, was for the government to pay couples to have children.
One factor in the declining marriage rate is the difficulty in obtaining affordable housing. This might be an obvious solution and maybe there are financial and economic issues, which I don't pretend to fully understand, but it seems to me that Korea is in an economic situation where they can afford to provide long-term housing loans, like those found in the United States. The Korean banking system has initiated a long-term mortgage program but from people that I've talked to it doesn't seem to have caught on very well. Are the interest rates too high? Can the government promote marriage by providing more incentives to get into the housing market for young couples?
At the heart of the matter, it seems to be a banking issue. And I don't pretend to understand banking, but, in the U.S., it is really easy to buy a home. Really easy. Recently I helped a Korean couple to apply for and qualify for a loan to buy their first home with a 10 percent down payment. Over the years, I've witnessed numerous Korean-American men and women becoming real estate millionaires through the simple act of obtaining mortgage loans in order to purchase homes and apartment complexes.
Often, my Korean-American friends comment with delight and surprise at how easy it is to purchase and manage real estate in America. The question is, why doesn't the banking system in Korea adopt similar practices?
I don't understand why it wouldn't work. Years ago in Korea, when the markets were unstable, I can see why banks would not set up a long-term investment system, but now, the Korean banking system and the Korean economic system are mature and stable. Why not offer long-term mortgage at an affordable, fixed interest rate?
Think of how many social ills this would solve! One of the major reasons young people cite for delaying marriage or not getting married at all, is the problem of home ownership due to skyrocketing housing prices and rising interest rates on mortgage loans.
Young couples would no longer have to accumulate the "jeonse" deposit (the infamous and insanely expensive key money system), by living in small apartments and gradually saving up key money to afford deposits for larger and larger places over many years, to eventually move into their "dream house" when the children are about ready to leave the nest.
In Korea's social values, renting is rightly seen as wasting money, and thus young Koreans will build equity through the jeonse/key-money system. Americans, on the other hand, in a large percentage, will live in rental homes their whole lives, even though ownership is relatively easy. Another percentage will own the rentals and build capital for their later years.
I'm not advocating that Korea replicate the American housing system with its large sector of rentals. That is not fitting for Korea. But my question is why won't Korea develop a banking system with long-term mortgage support so that young families can enjoy the benefits of comfortable housing sooner rather than later, so that marriages don't need to be postponed? The banking system in Korea appears so antiquated in many ways ― banks close at 3:45 p.m. They say 4:00 p.m., but if you're not there at 3:45 p.m., forget it. Customer-friendly? Unbelievably bureaucratic. Glaringly archaic. With a few token exceptions, "our girls" are the front-line tellers, and the men are the back-row managers.
Government has a critical role to play. The Korean government has announced plans to encourage marriage and childbirth through loans or payments. The government admits it has a role to play. So, why does the government not create systems that will support banking to provide a smaller down payment and long-term mortgages to assist in home ownership in Korea?
In America, just to be sure you understand, owner-occupied, first homes, for a young couple with good credit scores, homes can be purchased for a 10% down payment. Mortgages are usually for 20 years. The family pays the bank at roughly the same rate as they would pay for rent, but after 20 years, rather than having lost all that rent money, the family owns the home. Moreover, the value of the home will increase over the years.
The problem Korea faces is not so much a low-marriage problem, as it is an archaic banking problem. And a government policy problem. If the government supports the banking system, the marriage problem could be solved. And then the ideas for encouraging higher birthrates will make more sense and be more effective.
If earlier marriage and bearing more children is the goal, the key is to ease access to home ownership.
Mark Peterson (markpeterson@byu.edu) is a professor emeritus of Korean, Asian and Near Eastern languages at Brigham Young University in Utah.
