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North Korea's real estate price polarization deeper than in the South

Jo Hyon  |  2018-05-09 15:17

In theory, socialism is based on equality for all of its members in the spheres of politics, the economy, and culture. North Korea claims that its highest goal is for its people to enjoy happy lives and that the Party and the people are working together to decide their fates. However, an objective assessment of North Koreas realities shows that the standard of living for North Koreas elite and the regular people are completely different from state propaganda. 

In a country that calls itself socialist, the gap between the rich and poor, an evil attributed to capitalism, is becoming more pronounced by the day. The differences in wealth between elite officials (and donju, North Koreas nouveau rich) and regular citizens, the central and outer provinces, the city centers and their surrounding areas, are far beyond anything seen in South Korea.  

The difference in North Koreas housing prices in different areas of the country is becoming more severe, according to sources within the country. There are extreme differences in the prices of luxury houses located in the city centers and those owned by state bureaucrats and donju, and those owned by regular North Koreans in areas outside of the major cities. 

A Daily NK investigation of multiple sources across the country's major cities found that the price of a 230-square meter house in the Pyongyang's Waesong-dong Central District (Jung-gu) was around 300,000 US dollars, while a 30-square meter house in the Samgol-dong, Sadong District of Pyongyang, was around 700 US dollars. In short, the house in central Pyongyang was approximately 400 times more expensive as the one outside the Central District (56 times more expensive when accounting for the difference in the size of the house). 

In the city of Hyesan, which is on the border between North Korea and China, the price of an apartment in the expensive neighborhoods of Hyesan-dong and Hyegang-dong is around 65,000 to 70,000 Chinese yuan (or 959,000,000 North Korean won). In contrast, the cheapest price for a house outside of the city is 500 Chinese yuan (685,000 North Korean won), or 140 times cheaper than an apartment in central Hyesan. 

The highest priced houses in Pyongyang are 3,530 times more expensive than the lowest priced houses in Hyesan. This extreme mismatch in housing prices is present across North Korea. 

North Koreas elite proactively use marketization to accumulate wealth; polarization between the classes deepens 

The differences in house prices have arisen from the spread of marketization and the monopoly on profits by high-level bureaucrats and donju who control the countrys power and wealth. These trends have made the gap between the haves and the have-nots much more noticeable. 

Houses in Pyongyang are twice as expensive as those in Pyongsong, while those in Pyongyang are four times as expensive as those in Sinuiju. Meanwhile, houses in Haeju are 10 times cheaper than those in Pyongyang, while those in Sariwon are 6.7 times cheaper than those in Pyongyang. Houses in Wonsan are five times cheaper than those in Pyongyang, while those in Hamhung are 3.4 times cheaper. Houses in Chongjin, Nampo, Kangye, and Hyesan are 6.7, 20, and 16-17 times cheaper than those in Pyongyang, respectively. 

While the gap in house prices between Pyongyang and provincial cities like Pyongsong, Sinuiju, Hamhung and Chongjin are two to four times cheaper, all other cities are at least five or more times expensive than houses in Pyongyang. Cities that are located far inland like Kanggye and Hyesan are more than 20 and 17 times cheaper than houses in Pyongyang, respectively. In general, those cities that are located further away from Pyongyang are much less expensive. 

North Korea began to reduce investment in infrastructure during the severe economic downturn in the 1990s. This led to spatial polarization, while the expansion of marketplaces led to increasing land values around these areas of business. 

Ultimately, housing prices are determined by how close they are to these marketplaces. This trend has led to a new ranking system in how city land is valued. Real estate prices have skyrocketed as state bureaucrats and the donju have invested in the construction of new housing.  

North Korea must liberalize its marketization process 

Before marketization, houses were provided to North Koreans through a state-run system which was part of the broader planned socialist economy. In short, the state took on all the burden of providing housing to its citizens, which meant that houses officially held no value as financial assets. 

As marketization spread in North Korea, however, housing districts began to be separated into those for the elite, which were located in the city centers, and those for poorer citizens, which were located outside of the city centers. This trend created a new price structure for the nascent housing market.

The gap in housing prices evident in North Koreas cities arose from remnants of the countrys planned economy and elements of the free market that appeared as the country underwent marketization. 

In a capitalist society, increases in a wide-range of economic activity lead to growth; on the other hand, if economic activity decreases, it leads to economic stagnation. In other words, growth occurs under liberalized state control of the economy and active economic activity, whereas stagnation occurs when the economic system is closed and economic activity is low. 

Kim Jong Un hinted at his intention to turn North Korea into a normal state at the inter-Korean summit on April 27. It remains to be seen whether North Korea will move to create stability and freedom for its citizens, or a short-lived period of peace and prosperity aimed at maintaining the status quo. 
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