[EDITORIALS]Price ceiling a mistakeIt seems the government will decide whether to implement regulations on the sales price of new apartments sooner rather than later.
Originally, the decision was scheduled for the coming February, but it seems to have been concluded ahead of schedule in order to keep pace with the ruling Uri Party’s necessity to provide an apartment sales price policy to the public, which is upset with the ruling camp as a whole.
The Uri Party’s regulations on apartment prices has two major key points; disclosing the cost of construction and putting a ceiling on sales prices of new apartments. Both ideas come from an incorrect theory that limiting the prices of new apartments can lower all housing prices.
Some non-governmental organizations agreed to the policy, making the regulation look like it is the ultimate solution to rising real estate prices.
The regulation, however, is only an anti-market measure that cannot bring about the wanted solutions and may even distort the market.
We have continously pointed out that price regulations cannot relieve price hikes, but will increase speculation and demand for new apartments, and eventually wither the housing supply.
Demanding construction companies disclose their costs in building apartments is itself against the market economy and a fast way to decrease the supply of new apartments and lower quality.
Limits on prices induce lotto-like applications and speculative demands. Less supply means higher prices. Newly sold apartments make up only 3 percent of all apartments. Lowering prices on new apartments will not stablize the rising prices of the remaining 97 percent.
Disclosing prices on government-built apartments for low-income households and supplying them at affordable prices might not provoke big problems.
But prices for apartments built by private companies should be decided by the market, not by government regulations. The open price policy enacted in 1998 was based on this free market idea.
The government should stop being controlled by the Uri Party’s populist demand for regulations on prices.
Housing policies should be based on the free market theory. Even though that might take more time, in the end it will be the only way to prevent distortion of the market and bring about stabilized real estate prices.