Confused, distorted policies

Pandemonium erupted Monday as thousands of people rushed to bid for the right to buy into a yet-to-be-built office-apartment complex in Songdo, Incheon.
Because the prices of the units in the complex were only half the cost of the neighboring apartments, people rushed in to get quick profits. This shows that if prices for new apartments are lowered, it won’t reduce the prices of homes in neighboring areas. It would only result in hefty profits for the people who win the residential rights to the new units.
Adopting Internet bids would prevent disorder at the reception counters. But it would be impossible to prevent distortions and problems in the housing market which the new restrictions on apartment prices will cause.
Despite such situations, the government has presented a housing bill that goes against market principles. It is a problem that the government officials themselves know well the illeffects that such anti-market policies will have, yet still mislead the public with sophistry.
Cho Won-dong, head of the Finance Ministry’s economic policy bureau, said in a radio interview yesterday, “If the market stabilizes, the government could lift the policies that are thought to be anti-market [including the proposals to introduce a ceiling on new apartment prices and to force all developers make public their construction costs].”
That means that the government is saying the new housing bill, which has not yet been legislated or put into effect, could be removed. In other words, the government is promoting a bill that will be abolished as it goes against market principles.
Then, Mr. Cho made a strange explanation, saying, “When ceiling limits on new apartment prices were removed in the past, in accordance with market principles, the housing supply should have expanded if economic theory had been true, but it did not.”
But it was the government’s anti-market policies that obstructed the expansion in the housing supply, not a pro-market policy to liberalize new apartment prices.
The government needs to put pro-market policies into place to expand the housing supply, instead of pushing an anti-market housing bill that it now says could be abolished.
Because the government has such a confused and distorted market concept, the real estate policies are tottering and the housing market is being distorted.