As Seoul home prices spread beyond luxury districts, the article argues the government should focus less on punishing demand and more on creating desirable new housing supply.
A major apartment redevelopment project is under construction along the Han River in Banpo, Seocho District, Seoul, on July 23. At a national public forum on real estate policy held the same day, participants were divided over whether redevelopment and reconstruction projects such as this can meaningfully increase the housing supply.YONHAP
Cho Min-geun
The author is an editorial writer at the JoongAng Ilbo.
"Housing is a place to live, but some people treat it as something to buy."
That was Deputy Prime Minister and Finance Minister Koo Yun-cheol's message at a real estate tax forum last week. It echoed a remark made by former Land Minister Kim Hyun-mee during the Moon Jae-in administration: "A home is a place to live, not to buy. If you don't live there, sell it." The statement reflects a long-held progressive view that housing should be regarded primarily as shelter rather than as a tradable asset or a means of accumulating wealth. The policy implication is straightforward: Discourage home purchases through tighter lending rules and heavier taxes.
The challenge lies in drawing the line between homes that are lived in and homes that are owned for investment.
Under the Moon administration, the distinction was relatively simple. Owners of multiple homes were assumed to be buying property as an investment and faced heavier taxes, while those with only one home received more favorable treatment. Although the policy was controversial, its logic was easy to understand because few households actually live in several homes at once. The market, however, quickly adapted, concentrating demand on what Koreans called "one perfect home."
The current government appears ready to go a step further. Even a single home could be treated as an investment if it is exceptionally expensive or not occupied by its owner. That makes regulation far more complicated. At what price does a home stop being a residence and become an investment asset? Reaching a social consensus will be difficult because people differ in income, location, housing conditions and expectations. Set the threshold too high and the policy becomes ineffective. Set it too low and taxpayers are likely to resist.
Even if such a standard could be established, another problem would remain. Restricting investment demand is meant to improve affordability for ordinary residents. Yet recent developments in the Seoul metropolitan housing market suggest the outcome may be the opposite. After unprecedented lending restrictions targeted luxury apartments in Seoul's affluent Gangnam neighborhoods, prices quickly surged in lower-priced neighborhoods on the city's outskirts, precisely where many ordinary buyers had continued to find relatively affordable housing.
Why does this cycle of unintended consequences keep repeating? Because the market understands that taxes alone are not the strongest force driving housing prices. Whatever governments may say, a home is also an asset, and for most households it is their most important one. It is both a place to live and a store of wealth.
When liquidity is abundant, asset prices tend to rise despite repeated attempts to suppress them. During the Moon Jae-in administration, the government unveiled 28 separate real estate measures, yet housing prices continued climbing. Only after the U.S. Federal Reserve and other central banks sharply raised interest rates did the market finally cool. Such a dramatic reversal appears unlikely under today's macroeconomic conditions. Korea is expecting stronger growth, robust exports and fiscal expansion, all of which point to ample liquidity.
In this environment, the realistic goal should be to limit price increases and cushion the impact on genuine homebuyers. The best solution is to increase supply where demand is strongest. The difficulty is that Seoul has little land left for large-scale housing development. Redevelopment and reconstruction projects are virtually the only meaningful options, yet the government fears they could further fuel prices. That helps explain why Land, Infrastructure and Transport Minister Kim Yun-duk recently described housing as the administration's most difficult policy challenge.
Doing nothing, however, is not an option. If Seoul cannot provide enough new housing, policymakers should develop attractive alternatives. But simply filling empty land with apartment complexes is no longer enough. People naturally want to live in desirable neighborhoods that also preserve or increase the value of their assets. Rather than resisting that desire, governments should harness it.
Gangnam itself was created through that approach. Massive investment in transportation, education and cultural infrastructure, combined with deregulation and the relocation of prestigious high schools, transformed it into today's premier residential district. Similar ambition is needed for Seoul's satellite cities and regional innovation hubs. As the government prepares new tax proposals, it should avoid policies that divide people into opposing camps. A more practical approach would begin by recognizing ordinary people's aspirations and designing policies that work with them instead of against them.
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
