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Buyers go gaga for Gangnam
September 08, 2003
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| Little wonder that some Koreans spurn the stock market, which seems to go up and then down, in favor of a market that has seen no major slump, even during the dark days of the 1997-98 financial crisis. Real estate in land-short Korea, especially in the Seoul area, has always been considered a good investment and that market has not seen anything comparable to the stock market's 50-percent tumble after the Asian meltdown. In the tussle between Korea's housing haves and the have-nots, the government has tried and failed many times to ensure that Seoul residents have an affordable place to hang their hats. To get into the market, some Koreans say, you have to be lucky enough to have parents who own real estate. And in the Gangnam district of Seoul, south of the Han River, the prices are enough to give you a nosebleed. It’s not only speculation that has driven up prices there, however. The area is considered the best in the area because of its many amenities and especially because of its educational infrastructure, mostly private. But whatever the reasons, the price rises have stirred traditional egalitarian instincts among Koreans in addition to making it harder for all Seoulites to afford a home. That has triggered government efforts, mostly ineffectual, to curb the soaring prices. There is a difference between Gangnam and the rest of Seoul, even the affluent areas north of the river. The differences are not as great as the difference, say, between New York City’s skyscraper canyons and Los Angeles’ palm-lined boulevards and freeways, but they are striking. Even 30 years ago, the area was mostly fields and rice paddies with a few high-rises beginning to make an appearance. In Gangnam, the streets are wider, the buildings generally newer and the stores and restaurants more upscale. Doormen at hotels and swank shops have memorized the license plate numbers that identify cars of Gangnam residents, and give them a bit of extra attention. A few statistics tell the story. Apartment prices in the district have doubled in the past two years, and Lee Geun-myeong, a real estate agent in Gaepo-dong, said “Prices are rising sharply again, and apartment units for sale have disappeared. It's the typical sign of the beginning of a big jump.” The price of a unit in the Hyundai Third Apartments in Gaepo-dong rose 100 million won in one recent 10-day stretch. The 195-square-meter (2,098-square-foot) units cost 1.1 billion won ― about $936,000. But that’s seen as a bargain-basement price. The Eunma Apartments, the symbol of what some see as absurdly high housing prices in the district, cost more than 800 million won, although the size of the apartments there is only half that of the Hyundai apartment complex two kilometers (1.2 miles) away. One-and-a-half years ago, the price of an Eunma flat was under 400 million won; at the time, that was still about twice the price of a comparable apartment anywhere in Seoul other than Gangnam. The prices of Gangnam's housing stated to soar in the mid-1970s. At that time the 100-square kilometer area of rice paddies and orchards southeast of the Han River was being developed into a bedroom community for the overflowing capital city. The economy was beginning to boom, and Gangnam reaped the benefits. The wide roads and modern architecture drew the fancy of Koreans accustomed to the traditional look of the 600-year-old capital city. New money flowed there, and prices began what in some cases were thousand-fold increases in a quarter-century. Ahn Jang-won, a real estate analyst, said, “The Mecca of Korean real estate speculation is still Gangnam, and there is still reason for housing prices to rise.” But for Cho Gyeong-mok, 49, who lives in the Woosung Apartments in Daechi-dong, it’s not a matter of money alone. “I don’t want live in a 20-year-old, small, expensive place,” he said, “but for my children’s education, I have no other option.” Mr. Cho, an academic at Pusan National University now working at a government research institute here, has two sons in high school. He sends them both to some of the private education institutes, called hagwon, that most Koreans want their children to attend. Because the government schools focus on equality of curriculum, even in Gangnam’s schools, Koreans seeking a leg up on entry to good universities invest large sums in supplementary private education. Gangnam’s network of hagwon is considered the best in the country, and those in Daechi-dong are particularly renowned. When Korea shook off its hangover from the financial crisis and real estate prices began to rise again in 2001, prices roared upward there. Even government measures that included punitive taxes and wealth investigations of property owners had little effect on both speculators and parents determined to get their children off to a good start. In August, Dr. Chung Chun-kee, 45, moved from Hyehwa-dong in northern Seoul to Dogok-dong in Gangnam. He cited the availability of hagwon there, which he considered essential for his middle-school daughter to be accepted at a special purpose high school. Those schools, he said, offered a better-quality education than did regular high schools. “Either I had to drive her every day or my daughter would have to spend four hours daily on public transportation,” Dr. Chung said. “If it were not for the sake of my children’s education, I would not have moved back to southern Seoul, as I enjoyed living in northern Seoul,” Mr. Chung said. A recent research institute survey said that 65 percent of parents living in Gangnam were there for the education infrastructure. Only 10 percent said the return on their financial investment was the draw. Twenty percent said they would move to satellite cities ― if the new towns offered the same quality of education they had in Gangnam. But how soon, or whether, the education institutes will build up in the new towns is an open question. Part of the allure of the Gangnam institutes is their track record of getting their students into good high schools or good colleges, and those reputations are not quickly established. Meanwhile, the government’s efforts to control real estate prices appear feeble. Some experts said the recent hike in capital gains taxes has only reduced the number of housing units offered for sale, thus pushing prices up even further. Prices at a site where small apartments ― 60 square meters ― in Garak-dong will be razed and rebuilt jumped by 40 million won in the week of Aug. 20-27. They sagged a bit when the city announced on Aug. 28 that the new apartments to be built there would be only twice as large as the old ones, not 2.5 times as large. But the price drop stirred new transactions in the area that had been choked off by the price rise. Yun Jin-seop, a manager at at online real estate agency, said, “Ironically, the Seoul Metropolitan Government’s decision will likely boost the prices of the apartments, because it has increased the number of housing units offered for sale. No Hyun-woo, a salaried worker who recently bought a house in Incheon, said, “Housing prices here have remained relatively unchanged for 10 years, but my co-worker who bought a small apartment in Gangnam 20 years ago saw the price rise by almost 20 times during that period. Sometimes I think if I don’t do something to buy a house [in Gangnam] I would not only deprive my unborn children of better education but also lose a chance to make money.” Whatever the reason, the area is still a hot property. One bureaucrat involved in real estate matters said mournfully, “Cooling down the speculation in Gangnam is too much even for the government.” by Koh Han-sun |
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