Seoul residents in their 20s and 30s who don’t own a home suffer from extreme wealth inequality, a new study finds

Posted on : 2020-10-23 17:33 KST Modified on : 2020-10-23 17:33 KST
Income inequality has fallen slightly, but wealth inequality has become more severe amid soaring housing prices
An apartment complex in Seoul’s Gangnam District. (Yonhap News)
An apartment complex in Seoul’s Gangnam District. (Yonhap News)

Soaring house prices are causing wealth inequality to intensify between those who own houses and those who do not. Seoul residents in their 20s and 30s who don’t own a home suffer from extreme wealth inequality, a new study finds.

According to a report titled “The Role of Housing in Wealth Inequality,” published by the Korea Research Institute for Human Settlements on Oct. 22, the median value of total assets in the top quintile (20%) of households in terms of net assets last year was 1.27 billion won (US$1.12 million). That was 39.1 times greater than the median value for the bottom quintile, which was 32.52 million won (US$28,700).

There was a 77.6-fold gap in residential housing wealth (476.77 million won, or US$420,674, to 6.14 million won, or US$5,418) between the top and bottom quintiles. Factoring in real estate investments, which includes non-residential housing, land, and commercial property, brings the real estate wealth gap to a multiple of 101.6 (949.79 million, or US$837,973, to 9.36 million, or US$8,258).

Income and wealth inequality for different regions and age groups
Income and wealth inequality for different regions and age groups

Even though the gap in total assets between the top and bottom quintiles decreased from a multiple of 42.3 in 2012 to 39.1 last year, the report found that the gap in both residential housing (73.5 to 77.6 times) and real estate assets (100.5 to 101.6 times) had increased over the same period. And while Korea’s Gini coefficient, which expresses income inequality, fell from 0.38 in 2011 to 0.34 in 2018, wealth inequality has grown in severity.

When the report analyzed income and wealth inequality (the Gini coefficient) by age and area of residence, based on data from Korea’s 2018 housing survey, it found that wealth inequality was much more severe than income inequality in Seoul, where housing prices have spiked. Income inequality levels were fairly similar in Seoul (0.35), greater Seoul (SCA, 0.33), and the rest of the country (0.36), but real estate wealth inequality was higher in Seoul (0.72) than in the greater area (0.68) and in the rest of the country (0.59).

A Gini value closer to 0 signifies greater equality, while a value closer to 1 signifies greater inequality.

Householders in their 20s and 30s were found to have real estate wealth inequality of 0.8, nearing “absolute inequality” at 1. There was hardly any difference in the level of income equality between people in their 20s and 30s (0.29) and people in their 40s and 50s (0.28), but there was a big difference in the level of real estate wealth inequality, at 0.79 and 0.62, respectively.

Among Seoul residents in their 20s and 30s, households that don’t own a house seem to be struggling to build wealth. When wealth inequality was examined according to home ownership, the level of real estate wealth inequality was found to have a 62.3% impact on wealth inequality between those who own a home and those who don’t.

When people who own multiple homes are added to the equation, the impact of real estate wealth on wealth inequality rose to 67.9%. In effect, the wealth gap in Korea basically depends on how many properties a household owns.

“Because home ownership has such a big impact on the level of wealth inequality, we need to expand the supply of affordable and accessible housing to ensure that wealth inequality doesn’t escalate into social inequality,” said Oh Min-jun, a researcher with the Korea Research Institute for Human Settlements.

By Jin Myeong-seon, staff reporter

Please direct comments or questions to [english@hani.co.kr]

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