hankyoreh

A real estate frenzy has once again engulfed South Korea -- and with no way of knowing if we’re still in the middle of it or nearing the end. As with the numerous other times over the past 40 years or so that real estate prices have soared -- the late 1970s, the late 1980s to early 1990s, and the mid-2000s among them -- there have been winners and losers. Those who were first to hop on the trend are smiling like cats with profits in the hundreds of millions of won; those who didn’t move fast enough are suffering from resentment, envy, and feelings of defeat. A bigger issue is that we increasingly find ourselves in an era where it’s impossible to join the ranks of the real estate “winners” simply through a combination of diligently saved seed money and good timing.

There are two ways of building up assets (wealth): putting aside a portion of your income, and having assets passed down to you through inheritances and gifts. The situation of being unable to purchase a home simply through saving up your salary is nothing new -- but housing prices in Seoul today have reached a point that puts them far outside the reach of the average salaried worker. Meanwhile, we’re seeing a clear-cut phenomenon of the asset divide being reproduced as those who have assets already gain an even bigger share of the pie with the rise in their assets’ value, and the resulting assets are passed along to their children’s generation. An “age of inheritance” is drawing nigh.

According to National Tax Service figures on real estate gifts by household between 2014 and 2018, the value of housing and buildings “gifted” to people in their 20s and 30s rose by 3.3 times from 957.6 billion won (US$849.67 million) to 3.16 trillion won (US$2.8 billion) over that time period. The number of gifts also rose by 2.3 times from 6,440 in 2014 to 14,602 in 2018.

Even for people who scrape together every available resource, purchasing a home may remain out of reach. According to the Korea Appraisal Board, the average real transaction price for an apartment in Seoul this year stands at 844 million won (US$748,907). It’s more than many people can afford even with a mortgage loan and substantial credit loan put together. What ultimately determines whether you can buy a home is how much “help” you can get from your parents.

Ma Min-ji, who was born in 1989, chronicled the successes and failures of the real estate investments of her parents’ generation in a documentary titled “Family in the Bubble.” In a piece titled “Scrape Together Everything Down to Your Very Soul and Escape Monthly Rentals!” for “Participatory Society Monthly,” she noted that “even among newlyweds, the only ones who can board the ‘last train’ for an apartment and the so-called ‘gold spoons’ who can manage to get loans from both spouses’ parents.”

Kim Nak-nyeon, a Dongguk University economics professor who has researched inheritance as a proportion of wealth accumulation, noted in his report “Wealth and Inheritance, 1970-2014” that the percentage dropped from 37.7% in the 1980s to around 29% in the 1990s before climbing up again to 38.3% in the 2010s. Kim attributed this to the many opportunities for younger people to accumulate assets due to high rates of economic growth and savings and a low death rate even when the percentage represented by inheritance is not high; at the same time, he predicted that the same factors would work in the opposite direction as the aging population trend accelerates, resulting in a faster trend of increase in the proportion represented by inheritance.

In their study of asset transfers between generations, Sogang University sociology professor Lee Cheol-seung and Kangwon National University real estate studies professor Jeong Jun-ho noted that asset transfers (to children and grandchildren) by members of the industrialization era and the original real estate accumulation era generations (people born around the 1930s) had led to increased asset inequality for the subsequent generation -- an economic background behind the so-called “gold spoons” and “dirt spoons” described by the younger generation today. The same study (“Asset Transfers between Generations and Increased Intergenerational Inequality, 1990-2016”) predicted that asset-bequeathing activities would be every bit as active for the democratization generation as they have been for the industrialization generation.

Many are concerned about the reduced possibility of class mobility in South Korean society. Meanwhile, a clear phenomenon has emerged where parents use private education, personal networks, and cultural capital to “pass down” academic connections and jobs to their children. A more direct and simple means of bequeathing class status has also been intensifying: asset inheritance. Even if two people who have achieved the same profession at the same workplace through their own hard work and ability, there will be a big difference between those who have inherited assets and those who haven’t. Signs of the sort of “hereditary society” that the economist Thomas Piketty warned of are already evident in South Korea.

Ahn Seon-hee

By Ahn Seon-hee, director of economic desk

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