[EDITORIALS]Another housing price ‘patch’The real estate policy announced on Wednesday aims to suppress speculation through taxation. The gist of the plan is to raise property and capital gains taxes and give the government a share of profits from reconstruction and other development. President Roh Moo-hyun says the government will forbid real estate profiteering, and will not use real estate to revive the economy.
No one can object to kill two birds ―imposing fair taxes and stabilizing housing costs ―with one stone. But it will be hard to solve pricing problems with taxes alone. The government has always responded to an overheated real estate market with tax hikes, but the effects were short-term.
The possibility of negative side effects worries us most. Plans to double property taxes by 2008, and to start basing acquisition taxes on actual market prices next year, are such strong measures that we cannot help but think they are being imposed too hastily.
They make it more likely that owners of high-priced houses and apartment buildings and more than two housing units will sell. If taxes go up, speculation and potential demand are bound to be reduced. But if these policies stunt normal demand, it will be a problem.
We also have to overcome “tax resistance.” Ordinary people who own one housing unit shouldn’t suddenly have their taxes doubled or tripled. Already, people in some areas are complaining about higher taxes due to the changes that took effect early this year.
Another delicate matter is policies that require developers to give part of their profits to the government. The number of apartment buildings 30 years or older is rapidly increasing, and high-density redevelopment and reconstruction are inevitable. Though speculation on buildings marked for reconstruction is indeed causing problems, if the government starts asking for returns on development profits, redevelopment projects will go nowhere.
The government should curb its enthusiasm for real estate policymaking. This administration has already presented several such plans. We can’t take any more temporary patches. The government must plan for quality housing while cushioning market shock from the most recent tax revision. Only then will housing prices be able to make a soft landing.