[EDITORIALS]A land fund loop-the-loop

Home > Opinion > Editorials

print dictionary print

[EDITORIALS]A land fund loop-the-loop

It is impossible to explain the rise in housing prices in certain areas in Seoul after President Roh Moo-hyun took office without considering major speculators. To have apartment prices rising throughout such a large area, there must be hundreds of trillions of won (hundreds of million of dollars) worth of speculative capital involved.
That is why it is natural to view the 200-trillion won worth of mortgage loans as one of the main suspects. Over 400 trillion won of cash is floating around, targeting the real estate market, due to low interest rates.
Another force that shouldn’t be left out is the current administration. It is already an open secret in the market that the funds provided to support the government’s reckless development plans have stimulated real estate speculation. The land compensation funds, in which the government buys land from owners of land to be used in development projects, which average 5 to 6 trillion won a year, have shot up to 10 trillion won since 2003. They reached 17 trillion won last year and a further 19 trillion won per year will be given out over the next three years. As a result, around 100 trillion won, on a conservative estimate, will be injected into the real estate market.
Ideas to develop “administration cities”, “industrial cities” and “innovation cities” have all provided wonderful blueprints. But the problem is that funds spent supporting regional development are flowing back into apartments around the nation’s capital.
Of course there is no way to put restrictions on how the money should be used. But currently, there are signs that suggest that elderly citizens from a certain region are using the funds to disrupt the prices of Seoul’s high-end apartment complexes. This shows that the compensation funds, our tax money, are being concentrated on apartments in the greater Seoul area. In short, the whole nation is participating in distorting real estate prices by using the government’s development pledges as a medium.
Since there is a clear reason for the phenomenon, it is easy to come up with a solution. We believe that solving the problem of the bubble of apartment prices is only a matter of determination for Mr. Roh. First, provide quality apartments while continuously raising interest rates to absorb the excessive liquidity in the market. Next, stop complaining about the bubble while spending 19 trillion won on compensation every year. Disregard the political losses and take back the rash development plans or put them on hold for a certain period.
That would be the best warning that Mr. Roh could send to speculators.
Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)