[EDITORIALS]A deadly measureThe government and the governing party announced yesterday a “measure to promote the housing welfare of the public and to rationalize the housing market.” The core of the plan includes taxing profits made in reconstruction by a maximum 50 percent, and tightening regulations of bank loans secured against housing.
However, a closer look into the measure gives it the better name of a “measure to kill the housing market,” not a “measure to rationalize the housing market.” It would almost paralyze the supply function of reconstruction, when development profits that are not even realized are required to be paid, under the name of redeeming a windfall income. The plan also limits secured loans not only by housing price but also by the redeeming rate of the amount of principal and interest ― the opposite to income. This not only shrinks the free hand of an individual’s asset management but also intrudes on the self-control of banks. A person with a top priority of buying a fine house by saving money, would suffer hardship in getting the bank loan, and banks could not lend money.
To supply apartments, the government only reiterated their Pangyo and Songpa projects and presented plans to expand the Segok and Umyeon housing districts managed by the government for public rental, and Yangju and Gimpo cities’ housing projects. However, we see little effect to provide government-managed and thus more affordable housing to those who want to buy in affluent southern Seoul areas. Plus, Yangju and Gimpo cities have different conditions from those in areas of southern Seoul.
We recognize that the market economy alone cannot solve Korea’s real estate issues and the government must play an intervening role, as the resources are limited. However, the recently announced measures can only be read as the government’s intention to go against the market stream, or its will to have firm control over the housing market.
The surge of house prices in southern Seoul or excessive profits from reconstruction come as a result of demand exceeding supply. It is obvious that prices will surge for apartments that have already been built, when the government cracks down on reconstruction. The newer the apartment, the higher the price will be. This is a very reasonable principle of the housing market, but the government is trying hard to ignore it.
For example, the chief of the Government Information Agency described the housing market of southern Seoul as a “money game that will explode any minute.” If so, the government can leave the market as it is, if it will explode someday. However, the deputy finance minister said, “the settling of the southern Seoul housing situation is for the sake of stabilizing housing for the public.” According to the government, there is no fluctuation in the general housing market of Seoul and the nation, other than in southern Seoul and the other affluent Mok-dong area.
Therefore, it eludes our understanding why the public must feel anxious for the skyhigh housing price in southern Seoul.