Home prices a hot-button issue for millennial voters

Soaring property prices are a political hot potato for governments across the world as they face a young population struggling to fulfil, or even forced to give up, their dream of owning a home.

South Korean Daniel Ko, who is married with an 18-month-old son, has been trying to buy a home since May but has failed eight times.

The 29-year-old researcher tried bidding for a slot in a housing priority scheme known as boonyang, which allows home buyers to book a soon-to-launch apartment based on certain criteria.

Being newlywed with a child should boost his chances, but the competition was just too stiff.

The highest application rate for Seoul is about 163 applications for one apartment - double that of last year's.

In the nearby Gyeonggi province where Mr Ko lives, the highest rate is 28 - slightly lower than last year's 30 but still competitive.

The average size of an apartment is 105 sq m, usually a three-bedroom unit.

As South Korea nears the presidential election next March, access to affordable housing has emerged as a major issue that could swing millennial voters towards or against the ruling Democratic Party (DP).

A recent study by the Korea Society Opinion Institute showed that one in four voters believes the biggest challenge facing the next president is housing market stability.

Average property prices in Seoul have skyrocketed since President Moon Jae-in took power in 2017 and more than 20 rounds of cooling measures have failed to curb speculation.

The average price of an apartment in Seoul hit 1.1 billion won (S$1.3 million) in April - up from 607 million won four years ago.

Cash-strapped millennials - born between 1981 and 1996 and aged 25-40 - were badly hit.

 

Dashed dreams of home ownership, coupled with disillusionment with the DP, drove many to vote in anger against the party's candidates in mayorship by-elections for Seoul and Busan in April, causing the party to lose both seats by wide margins.

 

Confidence in the party has also been shaken by two major land speculation scandals. One involved the state-run Korea Land and Housing Corp, and the other implicated DP's presidential candidate Lee Jae-myung, who approved a housing project as mayor of Seongnam city in 2015.

He has denied giving preferential treatment to the owner of an asset management firm that reaped massive profits from the project while the city government suffered losses.

Mr Lee has vowed to make real estate reforms his top priority if he gets elected.

The main opposition People Power Party's presidential candidate Yoon Seok-youl has promised 2.5 million new homes if he gets elected, out of which 300,000 would be small apartments to be sold below market price to first-time buyers in their 20s and 30s.

Elsewhere in the world, housing is also a key election issue.

United States President Joe Biden pledged a tax credit worth up to US$15,000 (S$20,500) for first-time home buyers. That could be a game-changer in some areas, especially the South and Midwest, where property values are generally lower than in coastal cities. A Bill was introduced in Congress last April.

In Canada, Prime Minister Justin Trudeau, whose Liberals won re-election with a minority government, promised to introduce a two-year ban on foreigners buying homes in the country.

Governments have also stepped up restrictions in a bid to bring down property prices exacerbated by the pandemic.

In Beijing, the authorities are planning to roll out a pilot property tax programme. It is part of the drive for common prosperity - the current phase of economic development where more focus is placed on redistributing wealth.

As President Xi Jinping said, "homes are for living in, and not for speculation".

While there are no nationwide taxes on residential property, Shanghai and Chongqing started levying them on urban homes as part of an experiment in 2011. It was hard to gauge the effects given that the tax rate was low, and there were many exemptions, economists told The Straits Times.

High property prices, particularly in first-tier cities, are a common complaint among younger Chinese, who want to start a family in cities where they were not born in. The high costs are also partly why millennials are delaying childbirth and even marriage.

China's home ownership is 90 per cent, based on central bank data. But the cost of an apartment in Shenzhen - China's Silicon Valley - is 43.5 times a resident's average salary.

Beijing has been trying to prevent its asset bubble from bursting, but bringing prices down will not be a popular move as many have their wealth tied up in property.

In Hong Kong, pricey homes and a long wait list for subsidised public flats are problems that the government wants to solve but have failed to do so. Home ownership is far beyond the reach of the millennials and has been cited by some as a factor in the 2019 mass protests.

Developers are building even tinier nano homes to keep them affordable. For instance, in T Plus in Tuen Mun, the smallest apartment in the block is 128 sq ft, smaller than a car park space that is around 130 sq ft.

Secretary for Development Michael Wong said in October that the government will soon launch a study on the sizes of flats.

This could mean setting a minimum size for private homes at slightly more than 210 sq ft.

He had noted that the average living space per person in Tokyo is 210 sq ft, 260 in Shanghai, 270 in Singapore and 300 in Shenzhen.

The median per capita floor area of accommodation of all domestic households is 161.5 sq ft, the 2016 population by-census said.

In South Korea, it is the lack of savings that plague millennials.

A survey last year showed 70.6 per cent of them wanted to buy a house, but 73 per cent found it difficult to save enough. Another study said it would take up to 100 years for an average person in his 20s to save enough to buy a home in Seoul.

Mr Ko, who is staying in a rented apartment, said he had "secretly wished" that his parents would buy him a house. "But my parents would rather put their money in existing investments than help us, they want us to work for what we need," he added.