[EDITORIALS]Too little, too lateThe new government measure on reconstruction of apartments will have a direct effect on the real estate market. It will make compulsory the inclusion of a larger number of small and medium apartments in reconstruction projects, and sales of purchase rights given to residents of apartments to be reconstructed will be strictly restricted. The measure will lower expectations of profits from reconstruction rapidly and will stabilize soaring apartment prices in the Gangnam area. But it is not a fundamental solution.
Since newly supplied apartments in Seoul include a large number of reconstruction projects, they played a prominent role in apartment price rises. Thirty-six percent of the 520,000 units built in the past five years in Seoul were reconstruction projects; in the Gangnam district, their share was 80 percent.
Because speculation in reconstruction is aimed at large units, mandating the inclusion of smaller units will certainly decrease the profitability of reconstruction. The restriction on sales of purchase rights will also apply the brakes to rising prices and reconstruction.
The problem is that the government is always too late in its efforts to stop speculation. After sitting around with folded arms, the government produced a radical measure at the last minute, risking a violation of property rights. It is naive to say, “Don’t promote reconstruction because it creates problems.” There is also a loophole in the new measure. The prices of existing large apartments in Gangnam will rise because their numbers are limited. Restricting sales of purchase rights must overcome a controversy over the violation of private ownership rights.
Problems related to housing prices cannot be solved with a piecemeal policy. To solve the problem, long-term measures like increasing the tax on property ownership, expanding the supply of housing units by building new towns and improvement of the environment in residential areas ― educational facilities in particular ― must be pushed. The money floating around in the financial market must be directed to other investments. Otherwise, action against real estate speculation will have a limited effect.