[EDITORIALS]Build up for stable pricesThe Korean government’s announcement of a new housing development project at Geomdan, Incheon created enormous turbulence in the local real estate market. Now property prices in other cities that are candidates for future new towns are showing signs of jumping higher.
It is essential to build new residential accommodations to increase the housing supply in the long term. But the impact will vary widely depending on when and where such houses are built. For instance, condominium prices in Gangnam have shot up on speculation that the new town in Geomdan will be unable to absorb the ever-rising demand for housing in Gangnam. Meanwhile, environmentalists are raising concerns that other Seoul suburbs considered to be candidates for new housing construction projects will experience serious environmental damage, as most of Seoul’s suburbs are currently greenbelt areas.
The excessive demand for housing in the Gangnam area can only be met by easing restrictions on redevelopment projects, which means the government must allow people to build houses where they actually want them. Also, from an environmental perspective, it is better to increase housing density in urban areas, as new towns in Seoul’s suburbs will create huge traffic jams on highways. Therefore, the right course for real estate policy is to ease restrictions inside Seoul and allow redevelopment of urban plots as high rise apartments prior to building new residential towns. The government should also abolish its requirement that developers allocate a portion of their redevelopment to small condominiums and rentals, which the government initially intended to help low-income families. The demand for such properties has been very small.
Some critics suggest that easing restriction on redevelopment will send property prices higher. But this phenomenon will only last for a short time because if redevelopment projects become easier to complete, the housing supply will increase, eventually sending housing prices down.
Also, if the housing density in urban areas becomes too excessive, the housing prices in such places will naturally fall, according to the laws of supply and demand. That means the market will adjust itself naturally if the government exercises a little bit of patience.
None of these good outcomes will occur if the government keeps churning out costly and inefficient policies to achieve its ultimate goal of cooling down the Gangnam housing market.