[EDITORIALS]Real estate: back to basics

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[EDITORIALS]Real estate: back to basics

Housing prices, which had been on a decline since Oct. 29 when the government announced its general plan to curb rising housing prices, are climbing again. The government has announced that it would enforce the reporting of buying and selling homes beginning Monday. The areas slated for such special measures are the Gangnam, Gangdong and Songpa districts of Seoul and Bundang in Gyeonggi province. With the new system in place, acquisition tax and registration tax receipts are expected to triple their current level and the transfer tax will be determined by the actual transaction price. The move is expected to curb transactions in apartments.
But it is still questionable whether such a move can reduce housing prices that have already reached new highs in some districts. Despite a stern warning by the National Tax Service and speculative investment watch groups, the overheated buying spree surrounding Citipark in Yongsan district was a good example.
First, the reason why money floating in the market due to low interest rates flows into the real estate market, especially apartments, should be clarified. It is because the supply of apartments is not meeting demand, or at least is forecasted not to meet. It is only natural that money flows where supply and demand are out of balance, leaving room for making profits. To expect any long-term effect from the scheduled measures would be impossible. The only way to a permanent solution would be to make people recognize that housing with quality living environments will be available continuously, eliminating the premium put on such housing. The government has to go over its plans for supplying housing so that it can better gauge demand.
In addition, it needs a macroeconomic plan that would channel the abundant money into investments in companies, not real estate. Markets other than real estate need measures to cure the problem.
Even now, real estate prices in the Chungcheong provinces are rising due to expectations about the planned move of the capital, while in the metropolitan areas the market for dual-purpose buildings looks to stay frenzied. The government needs to come up with a plan that solves the fundamental problems. Restrictions are only short-term solutions.
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