[EDITORIALS]Populist policiesThe government announced revisions to its plan to stabilize the real estate market, which included publicizing the real cost of new apartment houses, and expanding a price cap on new housing prices for private apartment builders as well. Finance Minister Kwon O-kyu has opposed this plan, saying that more is lost than gained through it. Revealing the cost of new apartment units was opposed not only by Mr. Kwon, but also by Kang Bong-kyun, the chairman of the policy committee of the ruling party. However, they gave in to the majority of ruling party members. Regarding these directional shifts, the government said that specialists had raised concerns regarding making the cost of apartments public, but that they followed the demands of the general public.
Among policies, there are those where the government should follow public consensus, but the government should also weigh the costs and benefits in the long term and not be swayed over by public opinion. Civil servants exist separately to create specialized policies. If policies are to be decided this way, we wonder what role the Finance Ministry plays.
As the government has announced, most specialists are doubtful of this plan. Also, the number of new apartments built in a year is only 3 percent of the existing housing market. Even if apartment costs fall slightly due to this new plan, it will not be enough to force down housing prices in general.
On the other hand, construction companies will most likely leave the housing industry altogether, rather than revealing their costs. Also, even if the costs of housing are revealed, there will still be continuous conflict on whether those prices are correct.
If the housing supply provided by private builders is reduced, the price of houses will go up. That is because among the housing units supplied, almost 70 percent are provided by private builders. Moreover, if publicizing the cost is only mandatory in areas of heated speculation, that will reduce the amount of supply in regions where there is high demand.
Market prices naturally form through supply and demand. Lowering costs through restriction destroys the motive that builders have to reduce costs as much as possible within the given market prices in order to create the most profit, which is one of the driving factors that gets a market economy going.
Principles, once destroyed, are difficult to re-establish. The government must not waver on populism, leaning on people’s sentiments, but instead keep its convictions in order to establish a policy that is faithful to its principles.