A fascinating report in The Economist, which notes that some North Korean residents are becoming investors in the property market—despite the government’s theoretical monopoly on the allocation of housing.  As we have discussed in this blog previously, North Korea initiated economic reforms in 2002. Most wage and price controls were dropped and the market was opened to some private commerce. After five years of reform, the new wealth has gravitated mainly to the city’s privileged class.  However, as The Economist notes:

“…One recent trend is for residents to trade up to bigger, newly built apartments. Under the country’s Land Law, passed in 1977, all land belongs to the country and co-operatives, and cannot be bought, sold or even occupied. Yet a North Korean student who studied in China says businessmen are satisfying the demand for up-market housing by obtaining land rights from the local authorities and financing construction with capital from their customers. Chinese experts on North Korea say that the government itself has actually played an active role. Some of its agencies have financed the redevelopment of their properties with capital from their staff. They have then turned a profit by selling the new apartments through the government’s housing department.

The student says each apartment covers about 150 square metres (1,600 square feet) and costs as much as $40,000 in the popular Moranbong and Central districts of Pyongyang. Construction is now under way at six or seven sites in the capital’s residential areas. The building methods used are outdated, dominated by handmade concrete bricks. A five-storey building can take six months to complete. Because the construction is illegal there are fears that some of the newly built blocks might lose their permits or be confiscated even if they have already been paid for.

Officially, each citizen is entitled to receive 14 square metres of living space. But occupation, rank and “contribution” to the country can make a big difference. A “hero mother” who gives birth to triplets would receive a 200-square-metre home. One 28-year-old woman, who works as a tour guide, boasts of living in the Moranbong district in a 170-square-metre apartment with four bedrooms and two bathrooms, thanks to her father’s senior government position. Only married couples are eligible for an apartment from the government, but the guide, who says she is single, claims to be wangling one for herself.

The government probably tolerates privately financed buildings because it is strapped for cash and cannot afford to build housing for its citizens. Many uncompleted, suspended building projects dot Pyongyang’s skyline. Cranes gather rust, still perched on top of the buildings. North Koreans hope that foreign capital will help finish the buildings. According to Tigereye62.com, a website covering business in North Korea that is based in China’s border city of Dandong, the government is soliciting $50m-60m for Pyongyang’s historic Taedong-gang Hotel. The building, where “Dear Leader” Kim Jong Il spent many years with his father, Kim Il Sung, burned down four years ago. The government is also hoping foreign investors will stump up $30m-45m for the partly completed Ryugong Hotel, which was designed to be Asia’s tallest, with 105 floors. Construction has been stalled since 1992 because of a lack of funds.”