Balanced Regional Development Proving A Real Menace to Economy
by Brendon Carr
There are 19,948 unsold apartments now on the market (18,770 of which are in provincial areas outside Seoul), according to this Dong-A Ilbo story I noticed over the weekend. (You may be noticing how the residential real estate bubble is a hot issue in my mind. This is because it affects every citizen.)
An apartment complex was constructed a year ago in Suseong-gu, which had been considered Daegu’s wealthy district. But few residents have moved into the apartment as many lots have not been sold. Until recently, an apartment resident had worked as the head of the apartment complex control office. He decided to lead the control office by himself since a series of problems had appeared due to the large number of unoccupied homes.
Tens of millions of won of electrical and water fees are overdue since this apartment complex is not full of residents who can share the burden, he said. Relevant authorities even informed us that they would not supply electricity and water any longer. It’s helpless.
“Ghost town” apartment complexes seem to be a source of social problems like the foreclosure-wracked suburbs emerging in the United States.
Chillingly, the Dong-A story reports that there are another 110,000 units in the pipeline also expected to fail to find buyers. That’s almost six times the current inventory overhang—with no word as to how many of those units are in Seoul.
These apartment complexes are the fruit of Roh Moo Hyun’s “balanced regional development” plans, whereby it was much easier to redevelop apartments outside Seoul than in Seoul. This is because Roh wanted to improve living conditions in the provinces—without understanding the role that jobs, and, therefore, local income potential plays in how much house people can afford. It turns out that people in the provinces are so brokety broke that they need smaller apartments than have been built (which makes sense, because they have fewer children and their kids all move away to Seoul).
In a related vein, Good Schools Have Ripple Effects is an editorial I saw in the Chosun today. It reports how the Ministry of Education has identified the lesser opportunities for 24/7 cramming as a cause of poorer economic development and depopulation in the provinces, and will be investing $5 million in each of 88 public boarding schools in the provinces so that those students never get a moment’s respite. (See this thread at Marmot’s Hole for more—New York Times article is discussed and prompts scathing comments from foreign teachers at Korean elite preparatory institutions.)
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