Barking up the wrong tree

Yi Jung-jae
The author is a columnist of the JoongAng Ilbo.

I must keep my mouth shut when it comes to real estate. In fact, my first beat at the JoongAng Ilbo was real estate. But I have never been close to living in the hot Gangnam district in southern Seoul. In 1990, a few colleagues and I attempted to build a cooperative multi-family residence in Gangbuk, north of the Han River. We lost big. We finally managed to move into our permanent dwelling 10 years later with debt of over 100 million won ($89,566). My investment in property stopped there.

I did everything wrong. I should have bought an apartment in Gangnam. I live in a multi-dwelling unit in Gangbuk and cannot expect to make any money from the house. Instead I paid off debt for 10 years. I have never looked at the property market with personal interest ever since.

My friend, on the other hand, is a middle-aged man nearing retirement age. He used to say he was real estate-ignorant and simply bought an apartment in Gangnam like everyone else. He is more of an expert now. “The government is stupid getting involved in the Gangnam real estate market. The more authorities meddle, the higher the prices go. My apartment, which I bought for 300 million won 20 years ago, is now worth 3 billion won all thanks to the government,” he chuckles. I honestly want to smack his face every time he mentions the worth of his home.

A good policy should have changed my friend’s thinking. He is hardly a speculator. He is just a normal person who regards home as a place for the family to live in and their most valuable and lasting asset. Every one needs to take out a loan to buy an apartment. That is the reality of Koreans and the housing market. But the government ignored the reality. That is why all seven series of real estate measures the government released since President Moon Jae-in took office in May last year failed.

Why? First of all, it barked up the wrong tree. The government blamed speculative forces for the skyrocketing prices and did not look to the ordinary folks like my friend. Second, the message did not come across. The government wanted landlords to dispose of their extra homes. But even the key aides in the Blue House did not let go of their residences in the hot spot of Gangnam. Third, it was overconfident. It even refused to moderate and change direction even when its policies did more harm to the market.

It attempted to undo some of the wrongs through the measures on Sept. 13. It relented from its original position and offered to ramp up housing supplies by 300,000 units. It plans to use some land in the greenbelt zone and also allow more residential areas in the places designated for commercial or multi-purpose use in hopes of luring some demand away from Gangnam. The move could not have been easy for a leftist government that prizes the environment. All possible real estate measures have been squeezed out by now. But the devil is in the details.

First of all, the government should be more specific. For example, it must detail exactly how many additions the market can expect in the popular three districts in Gangnam two or three years later. Second, the government must invite more enterprises into the current rental home market where offerings entirely hinge on individuals owning several homes. There must be more programs like New Stay, a joint private-public project devoted to building and leasing out homes at capped rents and on a longer-term basis to ensure a steady flow of supplies. Third, the government must abandon ideology. Last but not least, the government’s housing policy should be able to convince ordinary folk. Jang Ha-sung, Moon’s policy chief, said the market cannot prevail over the government. His comment suggests that the president’s key aides still regard speculators as the real culprits. They still believe they can control and tame the market.

What is the use of fighting the market anyway? A land and transport minister who wrangled with the housing frenzy in the early 1980s said no measures could defeat bokbooin, a Korean term referring to housewives shopping around for housing bargains. “A good policy is a policy that does not go against the market’s will,” he said.

JoongAng Ilbo, Sept. 27, Page 30