Real estate vs. capital markets: Can policy narrow inequality?

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Real estate vs. capital markets: Can policy narrow inequality?

Published: 26 Mar. 2026, 00:01

Audio report: written by reporters, read by AI

Jang Deok-jin

The author is a professor of sociology at Seoul National University.

About 20 years ago, I encountered a puzzling situation while serving as a department chair. Each semester, about 30 students received scholarships. A teaching assistant prepared a preliminary list, which faculty members reviewed and finalized. One semester, I noticed that the top student in the department, who had earned perfect A+ grades in every course, was missing from the list.

Redevelopment plans have been unveiled for Guryong Village in Gaepo-dong, Gangnam District, often described as the last remaining shantytown in southern Seoul. The Seoul Metropolitan Government said on March 31, 2025, that it will accelerate the project with completion targeted for 2029. The photo, taken on April 1, 2025, shows the rundown village contrasted with high-end residential complexes in nearby Gaepo-dong and Dogok-dong. [YONHAP]

When I asked why, the answer was simple: The student lived in Apgujeong-dong, a wealthy neighborhood, and therefore did not need financial support. This raised a fundamental question about the nature of scholarships. Are they rewards for academic excellence or assistance for those in need? There is room for debate. But if even the top student receives no recognition simply because of family wealth, what incentive remains to strive for achievement?

Scholarships are not only about money. In many countries, even distinguished scholars in their 60s include scholarships they earned as students on their resumes. They serve as lasting evidence of dedication and accomplishment. After discussion, we decided to award the scholarship to the top student. From the following semester, we also introduced nonmonetary recognition that could support applications for further education or employment.

If high-performing students receive all the rewards, disparities may deepen, and some may call this unfair. On the other hand, if excellence is not rewarded at all, society risks losing motivation for achievement. Readers may consider which system they would prefer: a school that rewards performance or one that treats all students equally, regardless of outcomes.

The same dilemma applies at the national level. Recent reports have warned that Korea’s asset Gini coefficient has exceeded 0.6, reaching a record high. However, the reality is more nuanced than the figure suggests. The Gini coefficient measures inequality and can be divided into income and asset components. While income inequality reflects current earnings, asset inequality accumulates over time and is typically higher — often about twice the income Gini.

For example, even if the most expensive apartments in Seoul rise from 10 billion won to 20 billion won ($6.6 million), this may have little direct impact on most individuals’ daily lives. Yet such changes can significantly affect the asset Gini due to the nature of the calculation. Compared to other OECD countries, Korea’s asset inequality remains in the middle to upper-middle range.

Under the Lee Jae Myung administration, following efforts to address the aftermath of political unrest, real estate appears to have become a central policy priority. The administration views unchecked property speculation as a serious threat. It has even suggested excluding individuals who own multiple homes from participating in housing-related policymaking.

At the same time, policies appear designed to redirect capital from real estate into financial markets. Measures such as revisions to commercial law, share buybacks and cancellations and efforts to boost the benchmark Kospi index have been accompanied by tax incentives. While real estate faces heavier taxation, financial investments benefit from separate taxation schemes, income deductions and capital gains relief.

There are legitimate concerns. For instance, aggressive share buybacks could expose companies to hostile takeovers, as seen during the 2003 Sovereign Asset Management case. Still, at a broader level, there is little reason to oppose efforts to develop a capital market that has long been undervalued.

The key question, however, is whether shifting from real estate to financial markets can reduce inequality. In any market, there are winners and losers. In real estate, early entrants into desirable locations benefit as property values rise, creating higher barriers for others. Not all of these gains stem from speculation. Stories of farmers in Apgujeong who became wealthy after development illustrate how timing and circumstances can shape outcomes.

The Kospi and dollar-exchange rate is shown on a screen at Hana Bank's trading room in central Seoul on March 4, 2026. The benchmark KOSPI index, which hit a record high in late February, plunged more than 20 percent in two days following the outbreak of the Iran war, sending shockwaves through the market. [YONHAP]

In capital markets, wealth itself becomes the decisive factor. Those investing spare capital have an inherent advantage over those investing portions of their salaries. Small investors face greater risks. A single loss can have serious consequences. Emotional reactions to market fluctuations often lead to poor timing — selling in fear or buying at peaks.

For wealthier investors, losses may remain temporary on paper. They can afford to wait for recovery. While capital markets offer lower barriers to entry than real estate, they often produce wider disparities in outcomes.

Ultimately, the choice may not be between eliminating inequality, but between different forms of it. Policymakers face a trade-off between entrenched disparities and expanding ones. Whether this issue should be the highest priority in national governance remains an open question.

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.