South Korean President Moon Jae-in's ruling party suffered a devastating defeat in a special election for key mayoral posts amid political scandals and policy blunders, vote counts showed on Thursday.

Oh Se-hoon celebrates while watching election coverage in Seoul on Thursday. Oh, a member of the main opposition People Power Party, picked up 57.5 percent of the vote. Photo: VCG

Millions of South Koreans went to the polls on Wednesday to elect chiefs of the country's two largest cities, the capital Seoul and port city of Busan, among 21 local offices up for grabs. The election was widely seen a key barometer for potential political shifts for Moon's progressive party with less than one year before the March 9 presidential election.

Moon and his Democratic Party have seen their approval ratings plunge to record lows in recent months amid skyrocketing housing prices, deepening inequality, sex abuse scandals and souring ties with North Korea. "The election was a referendum on the Moon administration's economic policy failures, corruption scandals and the property speculation cases," said Kim Hyung-joon, a political science professor at Myongji University in Seoul.

Moon took office in 2017, promising to create jobs and a level playing field for all Koreans where hardworking people can afford a home and raise a family. But the median home prices have surged more than 50 percent in Seoul since 2017, the fastest pace in the world and under any elected Korean leader, despite some 25 rounds of cooling measures, according to statistics site Numbeo.

Anger at runaway home prices and an ongoing investigation into accusations of insider land trading has wiped out earlier rises in Moon's popularity from the government's handling of the coronavirus pandemic.