Chapter 441 |
The wedding was set for next spring.
We hadn't decided on a venue yet, but we were considering holding it in Hong Kong or Singapore.
To exaggerate a little, my wedding announcement sent ripples across the globe. Among all the countries, besides Korea and the United States, China and the UK showed particular interest.
The reason was Ellie's dual citizenship in Hong Kong and the UK.
You might wonder what China has to do with it, but the Chinese people's thinking is that Hong Kong is, of course, a part of China.
The People's Daily and the Global Times even explicitly referred to Ellie as a 'Chinese person from Hong Kong.' In any case, since they advocate for one country, it wasn't technically incorrect, but...
President Vysotsky called directly from the Kremlin, and Minister of Commerce Li Xuewei contacted me from Zhongnanhai.
He spoke in a friendly manner, as if nothing had ever happened between us.
[Congratulations on your wedding, CEO Kang. I believe this marriage will further enhance the friendly relations between OTK Company and China.]
I wasn't sure if we had a friendly relationship that could be enhanced. In any case, I couldn't say much when he was offering congratulations.
It wasn't as if I was going to give up on the Chinese market in the future.
"Thank you."
It felt like I spent 10 hours on the phone just receiving congratulations and exchanging simple greetings. I guess I wouldn't have to worry about gathering wedding guests.
"Shouldn't we invite Senior Im Jin-yong to the wedding too?"
"How do we know when he'll be out?"
The first trial was currently underway, but it was such a complex case with a truckload of documents that the verdict was expected to take some time.
The defense team for the Seosung Group was arguing that the arrest was unjust, mentioning the exposé by investigator Shin Jong-hoon.
Should I really visit him in jail with a wedding invitation?
***
In the UK House of Commons, an emergency debate on Brexit was held, after which the House voted on a resolution supporting an extension of the Brexit deadline.
Despite Prime Minister Cain's opposition, even the ruling party voted in favor, and the resolution passed with 555 votes, over 80 percent of the total.
For the time being, a brake had been put on a no-deal Brexit.
Of course, it was uncertain whether the EU would accept this, but the atmosphere in the UK was one of relief.
I thought of Grace Rothschild.
She had been hoping for a no-deal Brexit to happen. She must have been planning to profit from the chaos in the financial markets.
So, what would she be thinking about this situation?
"..."
Well, she'll handle it somehow.
I decided to stop worrying about other countries' affairs and focus on my own.
In Saemangeum, a new city development project, literally 'the largest since the founding of Korea,' was underway. The domestic economy, which had been stagnant for a while, was reviving with this as a catalyst.
Evaluation agencies all raised Korea's economic growth forecast. However, it wasn't without its problems.
Usually, when domestic demand revives and the economic growth rate rises, real estate prices tend to stir. But in Korea, they actually fell.
There were two main reasons. One was that prices had risen too much in the past, and the other was the expectation that some of the capital region's population would move out once Saemangeum was developed.
After the supplementary budget passed, Seoul's housing prices also turned to a downward trend, but self-proclaimed real estate gurus were confident that while Gyeonggi Province might be affected, Seoul would only dip slightly before rebounding.
But what happened?
A full-fledged decline began after that. The final blow was delivered by Assemblywoman Lee Jung-hye. She started by selling the apartment in Seocho-gu that was under her husband's name.
She sold a whopping six properties right after the confirmation hearing ended. When asked by reporters about it, Lee Jung-hye said she had no choice but to sell because her husband urgently needed business funds, but no one believed her.
She wasn't the only one; more than one or two politicians were selling or had put their homes up for sale.
Politicians had been, in a way, at the forefront of real estate speculation. Once the news got out, a flood of properties began to pour into real estate agencies.
Recently, the trend in the capital region was that prices were rising simply because they were rising.
The thinking was: if I sell my house now, I'll have to pay hundreds of thousands of dollars in capital gains tax, so it's better to just hold on to it. Even if the property tax goes up by $10,000, it's manageable since the house price is going up by $100,000 anyway. As long as the price keeps rising, no matter how expensive it gets, there will be buyers.
However, when a decline begins in earnest, the opposite situation unfolds. As the profit margin from a sale decreases, the capital gains tax is reduced, and the burden of property tax increases. In a falling market, the number of buyers is bound to decrease.
Transactions happen because the seller thinks the price is high, and the buyer thinks it's low.
No fool would sell their house today knowing it will be worth $100,000 more tomorrow. Conversely, no fool would buy a house today knowing it will be worth $100,000 less tomorrow.
The media, which had been quiet when apartment prices were rising by hundreds of thousands, began pouring out articles when they started falling by tens of thousands.
[Sharp Decline in Seoul Apartment Transactions]
[Housing Prices Fall Due to Haphazard National Land Development. The Burden Falls on the Common People]
[Real Estate Slump Deals a Major Blow to the Economy]
[Landlord-Business Owners Who Trusted the Government and Bought Homes Erupt in Anger Over Saemangeum Development]
[Falling Housing Prices Threaten Housing Stability for the Common People...]
[Mr. Kim, a 30-something Office Worker, Deepens His Worries Over Falling House Prices Every Morning He Wakes Up]
Taekgyu shared in the worry.
"Hmm, our 30-something office worker, Mr. Kim, is once again shouldering all the disasters happening in Korea by himself. Who on earth is this person?"
"Call them and ask."
I was curious too.
But why does the media worry about falling real estate prices as if it's their own problem?
The reason, of course, is not their love for viewers and subscribers, but because they live off advertising from construction companies. That's probably why their tone is so ridiculous.
The government must come up with special measures, they should boldly ease lending regulations and boost the real estate market, they should increase the floor area ratio for reconstruction and redevelopment, they should control the speed of the Saemangeum development, and so on.
"This article is interesting. Take a look."
I took the tablet Taekgyu handed me.
[Elderly Couple, Whose Only Asset Gathered Over a Lifetime is a Single House, Can't Sleep at Night with Worries About Their Retirement]
All they have is one apartment in Apgujeong with a view of the Han River. But as if being hit by a comprehensive real estate tax bomb wasn't enough, the house price has also dropped by $300,000, and they can't sleep at night.
This house is the elderly couple's only asset. Therefore, a fall in its price is inevitably fatal to their retirement.
Mr. Kim, in his 70s, lamented at the end of the interview.
'What would a chaebol like Kang Jin-hoo know about common people like us who only have one house in Apgujeong?'
Hundreds of comments were posted below the article.
-It went up by a million in 3 years and then dropped by 300k, doesn't that mean they actually made 700k? Am I the only one who doesn't get this?
-LOL an Apgujeong apartment with a Han River view.
-F***, it dropped by 300k and is now 3.2 million. Are we supposed to be worried about this?
-I'm so f***ing curious how much money the trash-reporter who wrote this has.
-Don't talk like that. They are a warm-hearted person who worries about someone with 3 million even though they don't even have 300k themselves.
-Can't they just sell the house?
-Nonsense. Are you telling them to move out of the house they've lived in their whole life!
-If you don't have money, you have to move. With that money, they could live in a penthouse in another area.
-LOL, that's easier said than done. Then why are you guys making a fuss about Seoul's high housing prices? If you go live in the mountains of Gangwon Province, a house there would be less than 100k.
-Who said to move to another neighborhood? They can sell the house, rent or lease in the same place, and live happily spending the rest of the money. Or apply for a reverse mortgage. If they're just going to sit on it, what kind of retirement asset is it? Frankly, if they say they won't sell that house even if they starve to death, then it doesn't matter if the house price drops by 200k or rises by 2 million. In fact, if it drops by 200k and their property tax goes down, they should be thanking Kang Jin-hoo.
-It's true that the real estate tax is too expensive right now. If you live in a 30-pyeong apartment in Gangnam, you have to pay $10,000 every year. And things like health insurance premiums go up along with it.
-But you can't tax a $100,000 house and a $1 million house the same, can you?
-At this rate, people will soon be saying they live in a $50 million house but only eat instant noodles because they have no money after paying taxes.
-Everyone! This is all because of Kang Jin-hoo!
-Let's protest in front of the OTK Company!
"..."
The entire nation is in an uproar over housing prices.
A thought suddenly occurred to me, and I picked up the intercom.
"Please organize some data on debt and bring it to me."
***
I looked over the documents that Yuri had organized and brought.
No asset rises forever, and no asset falls forever. There's a time to rise and a time to fall.
But it was true that the recent surge was unusual. Last year alone, housing prices in the metropolitan area rose by nearly 10 percent.
Ten percent might not sound like much, but that's the average after combining all the houses in the area.
The apartments that were actually traded had risen by tens of percent.
If a house price that was $1 million hits $2 million and then returns to $1 million, it doesn't just end with things returning to normal.
When an asset that has soared in a short period of time crashes, the aftereffects are significant. If such a situation really occurs, there will be a surge of bankruptcies.
The problem is the debt.
Currently, Korea's household debt is 1,700 trillion won, having long surpassed the GDP.
This means that even if you poured in all the goods produced in Korea in one year, you still couldn't pay off the debt.
Taekgyu blinked his eyes.
"At that rate, we couldn't pay it off even if we sold OTK Company."
It's impossible to have no debt while engaging in economic activities. It's also natural for debt to increase as the money supply grows with economic growth.
But the speed was excessively fast.
Over the past few years, household debt has risen by an average of over 10 percent annually. Considering that the economic growth rate during this period was 3-4 percent, it has risen more than twice as fast as the size of the economy.
"Everyone borrowed a lot. Why did they borrow so much money?"
"Because of the continued low-interest rates."
The interest burden is the same whether you borrow $100,000 when the interest rate is 4 percent or $200,000 when it's 2 percent. Because of this, everyone started borrowing money.
This situation is similar in other countries, but Korea's household debt problem is particularly severe.
During the global financial crisis triggered by the subprime mortgage crisis, real estate prices around the world plummeted. However, Korea had already put in place lending regulations such as LTV and DTI, so the increase was smaller compared to developed countries, and consequently, the decrease was also smaller.
While the United States and other developed countries went through a deleveraging process to adjust their debt, Korea avoided it. And then, as liquidity overflowed due to low-interest rates, a continuous increase in debt occurred.
Household debt increased because housing prices rose, and housing prices rose because household debt increased.
The government, which had been fanning the flames from the sidelines instead of controlling it, belatedly stepped in to block loans, but it was too late.
Debt requires bigger debt.
When an apartment is $500,000, a 10 percent increase is $50,000, but when it's $1 million, a 10 percent increase is $100,000. Even if apartment prices rise at the average rate of previous years, the actual increase doubles. And to buy them, you have to take out that much more in loans.
The government announced that the rate of debt growth was slowing, but this was more of an illusion created by the increase in the absolute amount.
Still, thanks to the well-established lending regulations, it's unlikely that housing prices will fall below the loan amount, but for those who bought houses late, the blow is inevitable.
Isn't that why everyone is protesting in front of the company like this?
In front of the company, hundreds of protesters had gathered, holding up banners and staging a protest.
"Right. That can happen."
I decided to just let it be. In a democratic country, it's natural for people to express their opinions.
The problem is the government's response.
Will they use this downturn as an opportunity for a soft landing, or...
***
As the housing price decline began in earnest and homeowners' complaints grew, the political sphere began to respond.
The government started to appease homeowners by increasing loans for non-homeowners and those in actual need, easing regulations on reconstruction and redevelopment, and promising to reconsider the "realization" of officially assessed land prices.