Sudden Valley, a Poonglim venture.
In Korea, if you can’t speak the language, you are forced to be a passive observer of everything you see. Sometimes I have no way of knowing if what I notice is just a one-off occurrence or whether it’s part of a larger trend. I keep the things I notice in the back of my mind and sometimes I make a similar observation later, or catch a blog post or news story where someone explains what I saw. Then everything comes together and a more complete picture forms.
Here’s something I’ve noticed since I first arrived in Korea three years ago. Take a bus out to Incheon, Yongin or Pangyo in the suburbs of Seoul, or spend a day in Busan, and you can’t escape the construction; it’s everywhere. New apartment buildings to the sky, with names ever more evocative of prospective residents’ aspirations — “Noblesse” is my favorite.
I know that Korea is a country with an aging population and children live with mom and dad until they get married. The overall trends is toward later marriages and fewer children. New births recorded this past March reached a 32-year low.
“Who,” I wonder, “is going to move into these buildings?” Apparently, nobody.
According to Reuters, desperate construction companies are convincing their own employees to buy up the unsold inventory. Construction workers are literally propping up the housing market with their own backs. Many are already neck-deep in debt, though.
South Korea’s household debt has doubled over a decade to levels where debt-to-income ratios are in excess of those in the United States before the sub-prime crash in 2008.
Hit by debt and the prolonged property market slump, January-March private consumption fell for the first time in five quarters as Koreans kept a tight hold on their wallets.
That’s right, Koreans’ spending priorities are as wacky as Americans’.
An afternoon walking around Seoul will quickly reveal to any visitor the local mania for conspicuous consumption.
When I first moved here, I just assumed that Korean youth were really enthusiastic about photography and attended photo hagwons. Every other 19-year-old I saw had a Canon DSLR setup worth thousands of dollars hanging around their necks. Curious, I observed anyone with a camera to see what they took pictures of. This pro-level gear was basically used to take snapshots of their friends in Auto mode.
Of course, high debt doesn’t lessen demand for luxury goods. It just means that demand is satisfied through new channels . Gotta keep up with the Kims, amirite?
It doesn’t stop at handbags and cameras. After living in one of Korea’s richest areas for the past two years, I currently live in what can best be described as a lower-middle-class neighbourhood of so-called villa homes, laundromats and chicken hofs. Walking down the street, I am confused when I see as many Mercedes, BMW and Audi cars as I did living in affluent Jeongja-dong. My housing is provided by my employer, as cheaply as they can get away with. If you live around here, you sure as shit aren’t fooling anyone as you dodge vegetable ajjummas with that Benz.
Massive consumer debt, combined with overproduced and overpriced housing inventory, should lead to a price correction. Indeed, that’s what’s happening according to the Reuters story.
Due to oversupply and lack of affordability, apartment prices in the Seoul metropolitan area have fallen 14.7 percent to end-2012 from July 2008, according to Moody’s Investors Service.
Unfortunately, despite the high per-capita number of college degrees, few can afford these low prices. According to the Korea Times, “Nearly four out of every 10 young workers in their 20s and 30s said they were overeducated.”
More and more people with college diplomas have to work as bank tellers, clerks and other simple labor jobs that have long been filled by high school graduates. If they don’t take such positions, many of them have no other choice but to remain unemployed.
A certain smug blogger needs to understand that the heli-tiger moms and their unrealistic expectations are killing the country’s labor force with every violin, EFL and Chinese calligraphy lesson they push their dead-eyed kids to sit through. I don’t think I’m being hyperbolic. This is from the Korea Times article quoted above (emphasis added):
The finding indicates that the problem has reached a critical point where the nation’s socioeconomic structure is threatened. The ratio of college graduates to the total population surged to 43.2 percent in 2010 from a mere 6.6 percent in 1970. It is a matter of time before the figure surpasses 50 percent.
The chaebol are just helping the heli-tiger moms finish the job. Like in the US and Cyprus, regular people are being coerced into bailing out incompetent companies and their investors.
Forcing employees to personally take on your company’s risk is shadier than than any black-listed hagwon owner I’ve ever read about. Pity those poor Poonglim employees and their kids who will be under that much more pressure to level up in my classroom.
(Hat-tip to Expat Hell for bringing the linked sources to my attention.)