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[EDITORIALS]Re-think home price policy

Published: 17 Nov. 2006, 21:27

Hardly a week has gone by since the government’s announcement of its new real estate policy, and now it is discussing additional measures. They include revealing the actual sales price of new apartments.
Kim Geun-tae, the ruling Uri Party chairman, said in order to stabilize the real estate market and revitalize the economy, the political parties’ leadership on real estate policy must be bolstered. He seems to be asking the government to come up with even stronger measures to curb real estate speculation. But for the ruling party, far from being a real estate expert itself, to say it will lead the way on real estate policy just because the government has been a failure looks awkward and causes only more chaos in the market.
What’s even more worrisome is that the new measures currently under discussion include anti-market measures, such as forcing construction companies to reveal the actual costs of their development of new apartments to bring down the prices for newly-constructed apartments. Also, the National Tax Service has begun auditing the tax records of builders who have worked on apartments and whose prices are relatively higher than others. This action generates questions about whether the tax agency began the audits to pressure construction companies so that the sales prices would be lowered.
Most likely, this bullying approach will not get the desired result, but will actually result in negative side effects such as reduced supply and overheated bidding for rights to new apartments. It has already become obvious that a major reason for the failure of the real estate policy is that the government ignored the functions of prices in the market. But officials still seem to believe that by cutting new apartment prices, they will be able to dampen the rising housing prices overall.
We urge them to take a look at how apartment prices work in the market, before they think about restrictions on them. Newly- built apartments account for about 3 percent of all homes each year. Cutting their price won’t put a dent in real estate prices on the whole. It would only benefit those who win the rights to the new units. That likely means the bidding for those rights would become even more intense than it already has been. Another possibility would be that the builders would either cut their supply, or the quality of new apartments might suffer.
Because of these reasons, it is simply illogical to talk about controlling prices for new apartments. The government should stop being so irresponsible.