Forget the Kospi and Gangnam home prices

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Forget the Kospi and Gangnam home prices

Published: 06 Mar. 2026, 00:04

Audio report: written by reporters, read by AI

Cho Min-geun

The author is an editorial writer at the JoongAng Ilbo.

“Will it really reach 5,000?”

Around the time the ruling party formed a “Kospi 5000 Special Committee,” shortly after the presidential election, a lawmaker on the committee reportedly asked a private-sector expert this question with visible skepticism. The target of 5,000 had been proposed in line with a campaign pledge by President Lee Jae Myung, but even some of those promoting it did not fully believe it would be realized.

The closing Kospi index is displayed on an electronic board in the dealing room of Hana Bank’s headquarters in Jung District, central Seoul, on March 5. The Kospi closed at 5,583.90, up 490.36 points (9.63 percent) from the previous session, while the Kosdaq finished at 1,116.41, rising 137.97 points (14.10 percent). The rebound followed a nearly 20 percent plunge over the previous two trading days. [NEWS1]

The expert responded with a polite remark: If one sets a bold goal, perhaps it might eventually be achieved, even if not during the current administration. For many in the market, the idea of a Kospi at 5,000 had long been considered a dream level. Neither lawmakers involved in the committee nor capital market specialists expected the target to be reached just seven months after the new government took office.

The lawmaker later contacted the same expert again, this time asking whether the market was rising too quickly. Achieving the target earlier than expected was welcome, but there was also concern about whether the market could suddenly fall. The expert replied that such an index level could not be created simply because a government wanted it. This time, he said, the rise had been driven by corporate performance rather than policy.

Indeed, the sudden surge toward 5,000 was largely powered by the semiconductor sector. Memory chip prices jumped amid rising demand from AI data centers, pushing expected earnings for Samsung Electronics and SK hynix sharply higher. Policy measures, including revisions to the Commercial Act, also played a role, though largely as a supporting factor.

The problem came afterward. Within only a month the index surged past 6,000 as the market began showing signs of overheating. A wave of FOMO-driven money poured into stocks as investors feared being left behind during a booming market.

Even analysts who had long criticized the undervaluation of Korean equities began warning that the pace of the rally was too rapid. Reports also circulated that borrowing to invest in stocks was increasing sharply.

Yet authorities expressed little concern. Instead the surge was described positively as a “money move” from speculative real estate markets toward a more productive capital market. News that the National Pension Service would increase its allocation to domestic equities also circulated. The market may well have interpreted this as a signal to buy stocks even with borrowed funds.

But when mountains grow high, valleys can run deep. After the United States launched a strike on Iran, the Kospi plunged 20 percent over two days. Compared to Japan, which faced similar economic conditions, the volatility appeared excessive.

Analysts say the index had risen too quickly and that unstable funds, including borrowed money, had flowed heavily into the market, leaving it vulnerable to external shocks. Although the market rebounded sharply on Thursday, the roller-coaster movement has prompted some investors to ask whether it is really different from the cryptocurrency market.

Stock indexes should be understood as results of policy, not as policy goals themselves. When economic fundamentals strengthen and corporate competitiveness improves, company earnings rise and stable capital flows into the stock market. Sustainable value growth cannot depend on short-term funds reacting to the fluctuating earnings of a small number of large companies.

Seeking quick results rather than building economic strength can produce unwanted side effects. Relying on stimulants instead of improving fundamentals may offer temporary boosts but risks long-term instability.

The confusion between policy goals and policy outcomes is also visible in real estate policy. When apartment prices in the Gangnam area began to decline, some government officials openly celebrated. One senior official reportedly remarked that the president had personally succeeded in bringing down Gangnam housing prices.

There may have been some influence from political leadership. Market analysts, however, say the real foundation was an unprecedentedly strict set of loan restrictions and a land transaction permit system applied across all of Seoul. The president’s political strategy may have been more about shaping the narrative.

By framing the issue as a confrontation between the government and owners of multiple homes and by emphasizing taxation issues, attention was redirected at a time when dissatisfaction over broad regulations and disappointing housing supply measures could have intensified.

President Lee Jae Myung enters an emergency Cabinet meeting at the presidential office in the Blue House on March 5. [JOINT PRESS CORPS]

Even if Gangnam housing prices fall slightly, the core problem remains. The ultimate objective of housing policy is residential stability. The key challenge is how to supply affordable housing that ordinary households and the middle class can realistically purchase.

Properties released by pressuring owners of multiple homes are unlikely to meet that demand. Even the supply plan announced in January faces uncertainty over whether it will proceed as intended. Regulations may buy time and political messaging may redirect attention, but conditions can shift quickly, much like the stock market’s sudden swings.

Concerns are already emerging about a shortage of jeonse (lump sum deposit) rental listings in the housing market.

At a Cabinet meeting on Thursday, President Lee remarked that the stock market had risen too sharply and that some correction could help strengthen its foundation. It is a sensible perspective.

Policy, too, should avoid reacting to every short-term movement. Instead it should proceed calmly while reinforcing economic fundamentals.

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.