Bad housing planThe government has announced a plan to increase available housing by building 5 million new houses over the next 10 years.
To achieve this, the government plans to remove greenbelt designation from an additional 100 square kilometers of land and increase the floor space index for houses for low-income earners to up to 200 percent.
The Ministry of Land, Transport and Maritime Affairs said the plan was aimed at controlling housing prices at the lower level.
But the plan is untimely and its rationale questionable. Housing prices are already going down. In areas other than Seoul, many newly built apartments have remained unsold.
We have consistently maintained that housing prices should be stabilized by increasing supply. But that was only when housing prices soared. The new policy will only accelerate the decline in housing prices.
The government has overlooked the possibility that a large-scale increase in supply might cause prices to plunge, which might lead to a financial crisis. If the supply increase causes the real estate market to nosedive, mortgage providers might become insolvent and financial companies might be pushed into a corner and go bankrupt.
The plan might bring about a Korean version of the subprime mortgage crisis. Our economy is still in shock from the fallout in the U.S.
President Lee Myung-bak said he would ensure that all low-income earners and newly married couples find homes while he is in office. He also said he would build 500,000 rental houses in greenbelts for them.
But the problem isn’t that there aren’t enough homes; it’s that they don’t have enough money.
Building more rental houses will not help them find the money for homes. The lack of housing is in central zones of the metropolitan area, not greenbelts. It makes no sense to build rental houses in greenbelts while refusing to lift regulations on reconstruction in the city center and of old apartments.
The government’s real intention behind this plan is to restore the economy by stimulating the civil engineering industry. But the plan won’t be able to restore the economy, and it is more likely to create chaos in the real estate market. The government must abandon the old-fashioned mentality from the dictatorship era that leaders front development of the country. Such outdated thoughts result in old-fashioned policies.
Another example of this is when Lee gathered business leaders and urged them to increase investment and employment, when companies are suffering from the international credit crunch. It is good to be motivated to restore the economy but investment doesn’t increase just because the president tells businessmen to do so.
Now is not the time to expand business or investment unreasonably. As we are facing a crisis, it is time to remove insecurities in the economy and prepare the basis for development in the future.