[OUTLOOK]Housing market taking revenge

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[OUTLOOK]Housing market taking revenge

The presidential senior secretary for public information is under severe criticism for having owned two apartments. But I do not see what is wrong with that. There is nothing wrong with a person owning two houses, whether he or she works for the Blue House or somewhere else. He moved to southern Seoul for its better education environment for his children. He lived in a small apartment for a long time and got the chance to move into a new and larger apartment. So, he sold the first apartment and moved to the better one. This is absolutely normal in Korean society. In fact, what he did wrong is not that he moved to a new apartment, but that in the past, he criticized others who had done the same as he did. His thoughtless comments now apply to him.
Anyway, there is nothing wrong with the senior secretary having owned two houses. Some media outlets criticize government officials at the Blue House for living in affluent southern Seoul, but that is outrageous. If the media continue to criticize officials for that reason they will lose their grounds to criticize the government’s failure in real estate policy.
The core reason for the failure is the government’s distorted attitude of blindly blaming people with two houses or more and people living in southern Seoul when it designed and implemented the policy. The fact that the senior secretary for public information at the Blue House is living in an expensive apartment in the affluent area proves that President Roh Moo-hyun’s real estate policy is limited.
Let’s look into the core of the problem. The Roh administration’s failed real estate policy was predicted. Its goal to stop speculation in the real estate market was very good, but the administration designed the policy while ignoring the dynamics of the market.
The administration was stupid enough to believe that it could suppress the housing market and win that battle. The government was even proud of itself for having such courage. In the process of making its policies, suggestions to compromise with the market were utterly refused. Heavy taxes were used as weapons. Convinced that if the government shut down a way out and imposed heavy taxes then people would inevitably surrender, the government kept pushing the public into a corner.
Now what? Purchases are not being made. Housing prices keep surging regardless of regulations. Speculation, not only in southern Seoul but also in other areas, is rapidly spreading.
None of the previous governments succeeded in controlling the real estate market by imposing heavy taxes. But the incumbent administration depended solely on taxation, and that was the beginning of the current misfortune.
The government staged numerous guerrilla attacks on the market with terrible side effects. Perhaps, the market took revenge on the government after being attacked with heavy taxes: Government officials who used to stop at nothing to push ahead with their policies have now lost face and people increasingly distrust them.
We should not expect too much from this administration. Even though the administration keeps coming up with revisions to its policies and measures, its basis remains the same. The first reason is that the president, the chief policymaker, has stuck to his ideas on real estate. Tied up with moral values, he emphasizes dysfunctions over proper functions of the markets. The administration will very unlikely abolish or change its tax policy. Second, the administration should rid itself of its prejudice against people in southern Seoul and make a fundamental change in housing measures, such as concerning the reconstruction of old apartment buildings. However, the administration is unlikely to change because if it does, it will lose face. Third, the administration should resolve other problems that are direct factors in deciding housing prices in certain areas. As long as it clings to its egalitarian policies, it is hard to expect the government to do its job. Fourth, in a macro policy, the interest rate should be raised, but that is impossible in the current economic environment. Fifth, the government plans to build a new satellite city, but that will not solve the problem of shortage of supply.
There is no other way than to keep on paying huge housing prices. Nobody knows how long it will be until this ends. The administration will probably see then what they have done, after facing the harsh revenge of the market.

*The writer is the CEO of the JoongAng ilbo News Magazine.

by Lee Chang-kyu
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