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Real estate bubble widens asset gap among income brackets
By Lee Yeon-woo
In one episode of the popular reality TV show "I Live Alone," actor Kim Kwang-kyu sighs in front of an apartment building in southern Seoul's affluent Gangnam District. He had just searched the market price of his old apartment, where he had lived for six years before moving out.
"I was asked to buy this home for 1 billion won ($750,000). Now, the price has hiked to 2.5 billion won," Kim said in the episode aired last December. "I dared not borrow a large amount of money at that time, but I really should have."
Kim's case depicts the turbulent ups and downs in the real estate market during the past few years. This turbulence has only worsened asset polarization, a recent report showed.
According to the Korean Institute for Health and Social Affairs (KIHASA), the richest 10 percent hold 43 percent of the nation's total net assets as of 2021.
The gap between the top and the lower classes has increased steadily for the past 10 years, recording more than 1.2 billion won in 2021. The bottom 20 percent income bracket holds average net assets worth 16.03 million won as of 2021, while the top 20 percent income bracket possesses average net assets worth 1.28 billion won, according to the report.
While the top 20 percent's average net assets increased by 4.2 billion won from 2012 to 2021, the bottom 20 percent's average net assets increased by only 5.12 million won. And widening the gap are the surging real estate prices.
"The asset portfolio of the bottom 20 percent hasn't changed much since 2012, but the significance of real estate has increased notably in the portfolio of the top 20 percent," the report noted, pointing out that the rising real estate prices have contributed significantly to the asset gap.
In the asset portfolio of the top 20 percent, real estate accounts for the majority of wealth ― 79.2 percent ― while financial assets account for 17.6 percent. For the bottom 20 percent, however, financial assets are mostly small assets (74.3 percent), and they have little real estate ― only 15.3 percent of their asset portfolio.
"So far, we have focused only on solving income polarization, which is a global trend. But asset polarization is a unique feature of Korea," said Seo Ji-yong, a business administration professor at Sangmyung University.
"Koreans have a strong desire to possess real estate, and their portfolio is highly focused on (achieving ownership of and managing) real estate. The polarization is likely to worsen in the future. The government should look at the issues from various angles and try to stabilize housing markets. It should especially support groups with fewer assets, such as young people."
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