Real estate: The challenge that could overshadow the Lee administration

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Real estate: The challenge that could overshadow the Lee administration

Published: 15 Jul. 2025, 00:02

Audio report: written by reporters, read by AI

Koh Hyun-kohn

The author is the executive editor of the JoongAng Ilbo.

In Korea, few policy issues are as critical and complex as real estate. It sits at the intersection of low birthrates, economic inequality and population concentration in the capital region. Despite President Lee Jae Myung’s stated focus on livelihood issues, housing prices — arguably the most urgent concern for ordinary citizens — seem to have slipped from the administration’s list of top priorities. The administration appears far more attentive to stock prices than to housing market dynamics. At the end of last month, when apartment prices in Seoul recorded their steepest monthly increase in nearly seven years, it was Bank of Korea (BOK) Gov. Rhee Chang-yong, not a government official, who voiced the most concern. That same week, President Lee delivered a policy address at the National Assembly without mentioning real estate once, despite covering a broad range of economic issues.

Apartment complexes are seen from Mount Namsan in central Seoul on July 7. [NEWS1]

It was only during the final Q. and A. session of a July 3 press conference that the president offered a brief comment. Referring to the latest mortgage lending cap in the capital area, Lee said the measure was “just a taste” of what’s to come, promising additional supply-side and demand-suppression policies. His tone was casual, almost dismissive. It was unclear whether his confidence stemmed from a firm strategy or a desire to reassure the public. Or perhaps, he underestimated the scale of the problem. History suggests that overconfidence in housing policy can lead to misjudgments. During his own presidency, Moon Jae-in once claimed to have “many powerful real estate measures in my back pocket.” At the time, few anticipated that housing prices would haunt his administration for the entirety of his term.

President Lee’s apparent reluctance to directly engage with the issue may be part of a calculated political strategy. Controversial and high-stakes topics like real estate, constitutional reform and inheritance tax are, for now, being shelved. The administration is choosing to focus on short-term achievements and popular issues such as a supplementary budget, capital market reforms, special prosecutor bills and prosecutorial reform. The public has responded positively, with approval ratings soaring past 60 percent. A presidential aide recently said the Blue House would not take control of housing policy “like the Moon administration did.” A cautious approach and a degree of strategic ambiguity are understandable. Revealing the administration’s entire policy arsenal too early would limit flexibility.

An apartment complex under construction in Seoul [YONHAP]

Still, housing is a domain where even presidential leadership often falls short. Economic policy is shaped largely by public sentiment. When the government stands back, it risks signaling indifference to rising prices. That perception alone can weaken the impact of policy and lead to reactive, rather than proactive, governance. If housing prices continue to rise unchecked, public sentiment may turn. Breaking the perception that “progressive administrations mean higher housing prices” remains an urgent task. Under President Roh Moo-hyun, housing prices in Seoul rose by 80 percent. Under President Moon, they surged by 119 percent, according to the Citizens' Coalition for Economic Justice. This time, the structural conditions are also unfavorable. Housing supply is tight. Only 24,000 housing units are expected to be completed in Seoul next year — half the number planned for this year. Even if the government accelerates supply now, it will take years for new units to become available. Redevelopment and reconstruction projects also face long timelines.

The Lee administration’s broader economic strategy is to mobilize liquidity and stimulate circulation. With private-sector financing constrained, the government is turning to public spending. The BOK may lower interest rates in the second half of the year to spur growth. These measures will increase the money supply. But money does not flow only into equities. Rising liquidity also pushes up prices and housing values. According to a Korea Development Institute study, a 1 percent increase in the money supply leads to a 0.9 percent rise in home prices within a year. The market understands this dynamic well and adjusts accordingly. Lending restrictions, while helpful, are short-term solutions. Similar restrictions introduced in 2019 — such as a ban on mortgages for apartments priced over 1.5 billion won — slowed the market temporarily, but prices rebounded six months later.

Buoyed by rising stock prices, the new administration seems confident. President Lee has argued that capital markets are becoming a viable alternative to real estate investment. While the intention is commendable, real estate and stocks are not true substitutes. They generally rise and fall together, driven by economic cycles and monetary policy. More troubling is the current disconnect: While the real economy struggles, asset prices climb. That is a textbook bubble. Without strong fundamentals, bubbles eventually burst — and the fallout is severe. Korea’s potential growth rate has fallen to 1.9 percent this year, according to the Organisation for Economic Cooperation and Development. If a fragile global economy collides with unpredictable policies from the Donald Trump administration and a domestic asset bubble, Korea could face prolonged stagnation.

President Lee Jae Myung answers questions from reporters during his first official press conference since taking office, held under the title “30 Days of the President: The Press Asks, the People Get Answers,” at the state guesthouse of the former presidential compound in Jongno District, central Seoul, on July 3. [JOINT PRESS CORPS]

Finger-pointing only worsens public distrust. Jin Sung-joon, policy chief for the Democratic Party, recently blamed rising Seoul home prices on the real estate policies of the Yoon Suk Yeol administration and Seoul Mayor Oh Se-hoon. Prime Minister Kim Min-seok struck a similar tone. This echoes the “blame the last government” rhetoric used under both the Moon and Yoon administrations. But the public is not interested in assigning blame. No one expects the new government to solve the housing crisis overnight. People simply want the government to step in and manage the situation before it worsens. With the housing market in turmoil, the administration cannot afford to act as if it is merely watching from afar. Before celebrating a bullish stock market, it must confront the challenge of real estate. For the Lee administration, success or failure may ultimately hinge on how it handles housing.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.