Stupid self-contradiction

The government is releasing yet another real estate measure — the 19th since President Moon Jae-in took office in May 2017. The steps are aimed to mitigate the balloon effect from the Dec. 16 package. They would likely include action in Suwon, Yongin, and Seongnam, Gyeonggi, satellite cities around the capital whose housing prices shot up after the December measure. They were initially included in the list subject to multiple regulations in December, but dropped out due to opposition from the ruling Democratic Party (DP) for fear of a loss of votes in the key constituencies around the capital. DP Chairman Lee Hae-chan still maintained that regulating the three areas should be approached “prudently.”

The government has come up with the new measure amidst criticism that it was using real estate policy for election. But Deputy Prime Minister for Economic Affairs, Hong Nam-ki, said that the new measure is not aimed at specific areas. The measure could turn out to be milder by naming the areas for “coordination” instead of putting them under special watch and regulation for speculation.

The flip-flop in real estate policy has aggravated market instability. Tenants fear a jump in rent prices as a result of hikes in apartment prices. Dilly-dallying by the government has fanned prices ballooning in areas outside the capital instead.

The effects were foreseeable when the strongest-yet measures were announced on Dec. 16. Many experts warned that the colossal liquidity amid low-interest environment would funnel into areas with less stricter regulation. Housing prices in Suwon, Gyeonggi, and Yongjin, Songpa District, jumped by 7.13 percentage points and 4.43 percentage points, respectively, over the last two months. The government vowed extra measures if the balloon effect shows, but has not acted until now.

Government measures have so far been regulatory with little respect to market principles. Instead of increasing supplies in demand-hot Seoul, authorities entirely focused on suppressing demand. Still the government and ruling party have been patting themselves on the back about “triumphing” on the real estate front and acting on behalf of ordinary citizens. But it now counts votes in setting new policies. The contradicting ways of the ruling party raises serious questions about its identity.

The government has utterly failed on the real estate front. It cannot undo the wrong if it counts on election factors.

JoongAng Ilbo, Feb. 19, Page 30