[EDITORIALS]Apartment agitation

The excessive overheating in the real estate market is showing no signs of cooling down. On Tuesday alone, simultaneous offerings of apartment houses in Seoul wound up with double-digit competition rates. Although not many sought-after apartments were offered this time, the struggle was tough enough, and we cannot help but be concerned how combative the race will get later this month when more than 2 million people will get priority bidding tickets. The situation is so serious that if left unchanged it will likely dash the hopes that lower-income people have of owning their own homes and prompt economic bubbles, which will undermine the stability of the entire economy.

The current property problems stem from a vicious cycle, in which rising sale prices of newly-built apartments stimulate the prices of existing ones, which in turn boost new apartment prices. Sale prices of new apartments have jumped by an average of 10 percent a year since February 1998, when the initial prices were liberalized. Prices of bigger units rose by a larger degree than smaller ones. Reconstruction of aging apartments is also the main culprit in this real estate battle, causing a surge in the demand for rental houses. According to a study by the Construction and Economy Research Institute of Korea, about 300,000 apartment houses in southern Seoul are more than 15 years old, qualifying for reconstruction. If rebuilding permits are issued at the current rate, southern Seoul will become a huge construction site, causing an irreversible blight on the urban scene.

The government has announced a series of measures to cool down the property market, including tax audits and heavy transfer taxes on the sale of the rights to buy apartments. But the effects proved ephemeral, and real estate speculations were soon rekindled. After all, the government's measures were stopgap, proof that the government lacks the determination to stabilize the property market or does not take things seriously enough.

Real estate overheating should be blamed on policy failures, rather than on the supply-demand imbalance. The government must be quick to draw up fundamental measures to stabilize the real estate market, not makeshift policies designed to boost the housing sector.