[EDITORIALS]A new real estate bubble

The real estate market appears to be rocking and rolling again. Apartment units at a complex in southern Seoul rose in price by 100 million won ($84,000) in just over a month, in large part because of a plan to raze and rebuild the whole complex. Prospective buyers are rushing to new complexes in Namyangju, northeast of Seoul, because the idea of the five-day workweek is encouraging people to look beyond the city limits for housing.

Housing prices rose sharply last winter, and there is concern that a new wave of inflation originating in the affluent parts of southern Seoul is spreading not only throughout the city but to the satellite cities around it. At the center of the increases is the inconsistent policy on reconstruction of older residential complexes. Such projects began in 1988 and only four out of the 1,068 complexes proposed for rebuilding have been denied permits. These rubber-stamp approvals have ignored questions of safety and environmental effects caused by the projects, while creating a hotbed for speculation, which has become rampant on the expectation that the new units will show dramatic capital gains.

It is not easy for the government to control real estate speculation with so much liquidity in the market, and interest rates cannot be raised because the stock market continues to struggle and the economy is still not showing clear-cut signs of a recovery. But the government cannot afford to wait on the sidelines, and Seoul has proposed to further restrict trading in the right to buy new apartments and quiz buyers on the source of their funds. But those are just palliatives. We need a consistent standard on reconstruction projects that includes an examination of the effects on the housing market, traffic and the environment.

Cooperatives formed to promote apartment reconstruction and construction companies must both be regulated more closely. Speculation will subside if standards are firm.

Part of the reason for the surge in housing prices in southern Seoul is the good living conditions there, especially the good schools. That suggests the need for better schools in other areas, but the key is that these policies will take a long time to show fruit and must be pursued consistently.