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[EDITORIALS]A realistic housing approach

Published: 15 Apr. 2005, 22:06

The government has again showed its strong will to curb rising real estate prices. Deputy Prime Minister and Finance Minister Han Duck-soo emphasized yesterday that the government will work on amending real estate laws and regulations without any delay, saying that the government is determined to stabilize the real estate market.
The government will collect the profits from apartment building reconstruction, revise the Real Estate Brokerage Act in order to make all persons involved in a real estate transaction report the actual prices of the transaction, and strengthen property taxes by imposing a national property tax on top of local property taxes.
Mr. Han also said the government would strengthen its supervision over real estate speculation and make tax investigations in areas where real estate prices are changing dramatically. All of this is not news, except that the finance minister said it. But what’s striking is that he said, “An increase in the supply of quality housing would be the ultimate answer to cooling down housing prices,” while explaining these short-term measures.
He confirmed the most realistic and obvious understanding ― although tax investigation is inevitable as a short-term measure to clamp down on real estate prices, increasing the housing supply is the only answer in the long term.
The many regulation-oriented measures have had only limited and temporary effects so far. Real estate prices will increase in the end unless demand is reduced or supply is increased. That is the market mechanism.
Without a frontal assault ― an increase in supply ― real estate prices will not stabilize just by strengthening regulations and supervision. The fact that housing prices in the Seoul metropolitan area were stabilized after 2 million housing units were constructed and new cities were established, proves that the supply-demand principle works in the housing market.
The government’s real estate policies should be based on such a realistic understanding. Korea already has enough regulations to remove speculative factors in the market. Now is the time to make policies that will continuously supply quality housing units in areas where housing demand is high. The expectation that supply will increase is the most certain measure to cool down speculative demand.