Murky housing policyThe Lee Myung-bak administration has introduced its first real estate measure since it took office. However, the plan is disappointing and it is not at all clear what the policy goal is.
Is it that the government is definitely going to increase the supply of housing? Or is the plan to stimulate the construction industry so it can contribute to the nation’s growth and employment?
Since the objective is unclear, the measure presented is a hodgepodge.
The government is worried that if it revives the construction sector, real estate prices will spike. If it eases redevelopment regulations, the government will be accused of promoting speculation.
As a result the government has created a plan that leaves untouched the framework of the regulation-heavy real estate policy created during the previous administration.
The government has ended up with a real estate policy that is very ambiguous. This new measure is not focused on stimulating the construction industry or straightening out the real estate market.
Looking at the measure, it is hard to tell which direction the government is planning to lead real estate policy.
There seems to be no principle and no philosophy behind it.
This government previously said it would not use taxes to hold down real estate speculation and that it would reform real estate related taxes, including the comprehensive real estate tax and capital gains tax. However, there is no mention of any tax reform in this measure.
The government also said it would focus on developing the capital’s housing market instead of constructing new towns.
But whereas the fundamental regulation on redevelopment is left untouched, the government has decided to expand new towns.
It’s hard to tell to which tune we are supposed to dance to.
The Roh administration paralyzed the real estate market with heavy taxes and excessive regulation. Housing prices stabilized not because of taxes and regulations but because the ceiling on mortgage loans was lowered.
The new real estate measure should focus on normalizing the real estate market by reforming taxes and regulations while appropriately managing demand through financial policy.
Only when the government can devise a practical measure based upon principles will the public trust the government’s real estate policy.