The Organisation for Economic Co-operation and Development (OECD) recently highlighted South Korea as the country with the largest gap in housing prices based on city size in its latest report.
Among the 18 countries surveyed, only in S. Korea did the average price of homes in major cities with populations over 1.5 million exceed three times the average price in small cities with fewer than 100,000 people.
This stark contrast reflects the ongoing trend in S. Korea, where rural areas are rapidly declining due to low birth rates and an aging population, while demand for real estate in the capital region remains strong as a means of asset formation and wealth accumulation.
The large cities with populations over 1.5 million include Seoul, Busan, Incheon, and Daegu, while small cities with fewer than 100,000 people include places like Sangju in Gyeongsangbuk-do (province), Dongducheon in Gyeonggi, and Donghae in Gangwon.
Experts suggest that the division will only grow within the capital region itself, with a clear distinction emerging between wealthy areas like Gangnam in Seoul and southern Gyeonggi-do, and other, more peripheral parts of the region. If this trend continues, S. Korea is at risk of becoming an extreme example of housing inequality, some warn.
In its recent report on regional and urban trends, the OECD found that housing prices in large cities with populations over 1.5 million increased by an average of 68% from 2013 to 2023. In contrast, small cities with populations under 100,000 saw only a modest increase of 16%. By 2023, the average housing price in large cities across OECD countries was 86% higher than in smaller cities.
However, S. Korea stood out as the country with the largest disparity in housing prices based on city size among the 18 countries in the OECD report. The average price of homes in S. Korean large cities was 66.3% higher than the overall average, while in small cities, it was 46.5% lower.
As a result, the average price in S. Korean large cities was estimated to be 211% higher than that in smaller cities, the only country where the gap exceeded 200%. Only Hungary (116%) and the United States (162%) had gaps greater than 100%, while countries like the United Kingdom (19.5%) and Poland (41.8%) had gaps of less than 50%.
The OECD noted that while rising housing prices in larger cities are expected due to increased demand, rapid price hikes can cause imbalances in the housing market. It also pointed out that excessively high prices can erode purchasing power, forcing residents of large cities to either abandon their home-buying plans or devote most of their income and assets to housing costs.
This extreme housing gap has turned S. Koreans into so-called “house-poor” individuals, owning real estate but lacking liquidity. According to Statistics Korea, last year, real estate accounted for 79% of the average assets (720 million won, or approximately $501,500) of households owning their homes.
As regional depopulation accelerates, the gap in infrastructure between large and small cities has worsened, further driving S. Koreans into a house-poor situation.
The OECD’s report also examined the quality of public transportation in different regions, calculating the percentage of destinations within 8 kilometers of a hub that could be reached within 30 minutes by public transit. For instance, in Gumi, Gyeongsangbuk-do, only 34.8% of destinations were accessible, compared to cities like Daejeon (65.2%) and Ulsan (68.1%).
Seo Jin-Hyeong, a professor at Kwangwoon University, noted that “Despite sky-high housing prices in the capital region, people continue to endure the burden due to the widening gap in education, healthcare, transportation, and job opportunities between large and small cities.”
The concentration of industrial infrastructure in areas like Gangnam in Seoul and Gyeongginam-do further fuels this divide. While industrial zones in cities like Yeosu and Ulsan are struggling, new industrial parks are being developed in places like Bucheon’s Daejang New City (SK) and Yongin (Samsung) in the capital region. As young people follow job opportunities to these areas, the gap between large and small cities is expected to continue widening.
