Mr. Kim bought a 109㎡ apartment in 'Bundang New Town' in mid 2006. Although the apartment

 
prices were nearing 700 million won, he bought it by going into over 400 million won in debt because he was anxious that he would never be able to buy an apartment in an area such as Bundang and he also expected the apartment price to go up further. At first, the interest payments of 2 million won were not worrisome, because the value of the house rose over 100 million won only six months after he bought the apartment. 
    The problem began one year later in 2008. As time went by business connections diminished and the cost of the apartment plunged. In the end, the apartments that cost 700 million won had dropped by 100 million won. As he could not stand it anymore, he put his house up for sale. However, as soon as the price began to increase again, he kept the apartment in 2009. However the cost of the apartment started to decline again after September 2009 and ended at about 500 million won. 
    At this point in time, Mr. Kim had lost about 200 million won by depreciation of his property and over 100 million won because of bank interest and trading expenses. Add other opportunity costs and the stress on his body, and mind. Four years after buying an apartment, he could not wear well and could not eat well. He said, "I am a tenant of the bank's housing and I am just a slave of this house. 
    Kim's story is not much different from other people. it is just a matter of degree. We can find such incidents in Seoul, in all sorts of new towns in the capital area and in redevelopment areas. We call people like Kim 'House Poor'. It is a difficult word to understand because it means 'a poor person who has her own house'. They buy a house by getting a loan and then become poor because of the high loan rate and debt. How many 'house poor' are there in Korea?  
    According to the program director of Munhwa Broadcasting Corporation, Kim Jae-young's research, the house poor include 950,000 families in the capital area plus 198,000 on a national scale produced by purchase of existing houses and new apartment distribution. There numbers are very conservative
 
because there were so many local areas where the rising price of houses had stopped from 2004 to 2005. Therefore the percentage of poor households in local areas is higher than the percentage in the capital area. Furthermore, these numbers do not include the trading transactions of detached houses and row houses. The major reason is that on par value is used in the estimation. 
    The biggest problem about this is that there is a great potential for an increase in the number of house poor. Media and real estate companies that have major interests in real estate have not identified this problem, but professional economic research organizations have predicted the fall of the real estate market. We cannot deny this depreciation because of the macroeconomic stream surrounding real estate. This means that the number of house poor will increase geometrically while housing prices will decrease. 
    Do you know why all these house poor are rousing serious controversy? Although it is difficult to clarify the cause of house poor, it is an undeniable face that house poor problem is the end result of Korea's social economy contradiction. Therefore if you really want to find a cause for this situation, you have to look into the social economic background of Korea. In 1998, the economic crisis made the employment system unstable and it caused layoffs and early retirement to be commonplace. Through this process, Korean society became a 'Chronic Anxious Society' in the 2000s. in this situation, each household had an uncertain future, so they explored measures to save themselves through real estate investment. An apartment was different from other investments, because it increased steadily after the economic crisis though there was deviation according to the area and temporary fluctuation. Therefore investment in real estate was the only stable target. However, we cannot regard the feverish investment in real estate as individual greed. The 'Chronic Anxious Society' was created by people who had political and economical authority. These powerful people instigated the real estate investment. 
    The government tried to resolve the economic problem after the IMF crisis of 1998 by mobilizing
 
household debt. Household debt was mobilized in a large part through real estate. What is worse, President Kim Dae-jung's government used every real estate deregulation measure possible and promoted speculation to stimulate the real estate business under the pretense of overcoming the financial crisis. 
    From the point of view of government, there was nothing like a civil engineering and construction business to put the economy back on track. When we take a look at President Roh Moo-hyun's real estate policy, we notice that for the most part the policies reflected construction company's interests. This back-scratching relationship between the government and construction companies is a serious problem. 
    The commercial banks also kept pumping money into the property market. From the point of view of financial companies, property loans were relatively safe since they can take something as collateral. Mortgage units are large so commercial banks encouraged households' property loans. 
    The media also played an important role in causing this grave situation. Major newspapers and other business magazines provide all sorts of real estate information that cannot be identified as articles or advertisements. These articles contain advertising information that is full of fantasy and there is seldom a line which delivers concrete information and facts to the consumer. the media provides advertisements for real estate because the feature page is one of their major sources of income. They are writing advertisements under the pretext of providing investment information in order to pursue profit.  
 
    These four factors promoted the housing market bubble and made a trap that general households could not help falling into. 
    The house poor are a product of the Korean social economy contradiction and individual excessive greed. People consider a house to be an investment vehicle, not a comfortable shelter for their family. The people who had dreams of big profit ended up in the house poor line and have had serious consequences. We must face reality and assess real property value in order co stop this dangerous progression. The government has to prevent general households from becoming victims of the construction business and the real estate marker and start trying to make their people happy. 

 

By Ahn Na-ri CP Reporter 
ahn-nari@cnu.ac.kr

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