Real estate bubble in South Korea.

South Korea's housing market is dominated by home ownership as opposed to renting. According to an April 28, 2005 editorial in The Korea Times (Seoul), consumer preference for home ownership borders on obsession and is largely responsible for the sharp increase in house prices in metropolitan areas.

The editorial cited government concern that speculators were profiteering from house price increases because the market is so tight. The Times offered a comparison between housing in Europe and housing in South Korea. In Europe 20 percent of the housing stock is made up of rental units. Whereas in South Korea, only 4.4 percent of the housing stock is offered for rent.

The Times referred to a government plan presented on April 27, 2005 that called for the construction of 1-million housing units specifically directed at the rental market. This, ostensibly, was in response to the speculative boom in housing that has caused many South Korean families to be priced out of the home ownership market. The Times expressed the opinion that the government's plan appeared to be too ambitious. The editorial, however, conceded that the direction was right.

The problem has apparently become so serious that the country's President was moved to comment on the situation saying, in effect, that the government was not going to tolerate profiteering by speculators at the expense of ordinary Koreans.

The Times said also that a solution to the problem was not merely building more rental units. There was a marketing issue as well. Rental units in Korea are linked with low income status, an image of poverty. If the contemplated rental units were designed and built to attract middle income consumers, housing price pressure might subside.