[EDITORIALS]It’s decision timeReal estate prices, which had stabilized somewhat with the government’s crackdown in early September, are rising once again a month later.
The prices in Seoul’s Gangnam area and Gyeonggi province’s Bundang and Ilsan have risen steeply, and now hot money is flocking to Busan and Daegu as a speculation boom engulfs those cities. Although the president said, “I will use all measures to stabilize real estate prices,” that only pressed bureaucrats to come up with quick fixes.
Because the September policy measures attempted to control speculation in units with rebuilding plans, the prices of apartments whose rebuilding plans were already approved and larger apartments have soared. Higher real estate taxes were a step in the right direction, but in the longer term the tax increase will just raise prices. The steps last month have had only a slight impact.
Now the government is talking about mandatory disclosure of the elements that go into the price of an apartment when it is put on the market before construction begins. But there are many problems in the real estate market. It has many layers; contractors have many subcontractors. And 10,000 new real estate agents appear annually. That all contributes to the overheating of the market.
The key point is that if government does not get a grip on the 400 trillion won ($347 billion) in funds in the real estate market, all policies will have their limits.
According to LG Economic Institute, the nominal economic growth rate for 2001 was 6.5 percent, but apartment prices of Seoul rose by 25 percent, four times the growth rate of the economy, which in turn spreads concern about a bubble that could burst. In fact, it is bound to burst, and the result could be a blow more severe than the ten-year recession that a similar burst bubble in Japan caused.
If we raise interest rates, the economy will be hit hard, and if we leave them low, the bubble will spread. But we have come to a point where we must make a decision. We must tighten control on real estate loans, because the war against real estate inflation is a life or death issue for our economy.