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[EDITORIALS]Hold apartment prices

Published: 05 Jan. 2003, 22:50

The government has made strenuous efforts this year to put out a rekindled fire in apartment prices, only to see those efforts fail. The government mobilized drastic measures such as vigorous tax investigations and restrictions on the sales of apartment buying rights, but the blaze seems out of control. In February, in both southern and northern parts of Seoul, apartment prices continued their upward movements. The city even witnessed the advent of an apartment unit priced above 40 million won ($30,000) per 3.3 square meters, on a site of an older apartment that was razed for a reconstruction project in the upscale Gangnam area.

What has debilitated the government tools devised to quell the ascending movement that may lead to a revived speculation in the apartment market? On a broader scale, complex causes are in operation, such as the tipped balance between the demand and supply of housing, Koreans' zeal toward educating their children and the environment have all intersected. But the fundamental problem lies in the government's liberalization of apartment prices in 1998. Given leeway in pricing one of the essential necessities of life, construction companies without reservation have lifted their apartment prices, citing, for example, that they used luxurious materials in decoration. Once a month, newly approved apartment complexes in Seoul hold a collective bidding for buyers. In 1997, before the free-up of apartment pricing, the average apartment price was 4.64 million won per 3.3 square meters. The figure shot up over 7 million won this year.

Apartment prices in the Gangnam area more than doubled in the same period. A vicious cycle is at work: The rising prices of new apartment units affect the existing ones, whose boosted prices in turn are factored into the prices of new apartments.

The government must introduce a system under which provincial governments, consumers, industry experts and civic activists can review whether the apartment prices are set at reasonable levels. Most of all, construction companies themselves should exercise restraint in overpricing their apartment units, for at least one reason - to keep a liberalized pricing system in place.