[EDITORIALS]Gangnam house price spiralThe National Tax Service will launch an intensive tax inspection of apartments and dual-purpose buildings in Gangnam district, which is intended to quell the housing price spiral before moving season arrives.
Real estate prices in Gangnam did not decline even after the government took measures to curb prices. In the case of redevelopment apartments in Dogok and Gaepo in Gangnam, the price has gone up 50 million won ($42,400) to 100 million won in a few months’ time. This is a far cry from northern Seoul, where sluggish sales of newly built apartments forced the rental market down. People living in rented homes cannot move because they cannot get back the lump sum money they deposited with the owner.
Skeptics say that the inspection will succeed in controlling speculative demand temporarily, but it is not sufficient to root out real estate speculation. Since tax authorities have often used tax inspection as a remedy, dealers who are used to such practices close their offices and wait until it is over.
The case of Gangnam district raises the difficult problem of a chronic imbalance between demand and supply of housing in that area which cannot be solved through market-related measures. Schools and various convenience facilities are concentrated in the area, and many people want to move into the community. The difference in residential conditions has made the gap between real estate prices wider, and Gangnam has become the center of real estate market fluctuations.
Tax inspection and designation as a real estate speculation area will help to ease the problems. But the effect of price controls will be limited. More fundamental is increasing the supply. To compete with Gangnam, at least one area with a similar educational environment should be developed soon. Speculative money concentrated in the real estate market should be directed to other areas. The property tax must be raised and other real estate-related laws should be revised. Gangnam shows us that we need a combination of well-coordinated policy guidelines and advanced measures to lead the market.