Revitalizing real estateIn its latest effort to buoy the sluggish real estate market, the Korean government is poised to ease property-related regulations en masse. It has been rolling out various deregulation measures, but this time it plans to lift practically all restrictions in order to stave off a further nosedive in real estate prices amid the slumping economy.
The actions would mean flushing all the regulations the former Roh Moo-hyun administration went to great pains to implement in its quest to stem real estate speculation.
The government’s drastic steps are understandable, as it needs to rejuvenate the property sector to boost domestic consumption in the face of global economic turmoil.
But market experts say the lethargic market won’t likely suddenly come to life because of the measures, and predict that housing prices will continue to fall for the time being.
The various measures Roh Moo-hyun’s government introduced to rein in property prices had also proved unsuccessful. What actually damped prices were tougher mortgage screening policies and a hike in interest rates.
This proves that restrictions are not the best instrument with which to control real estate prices. They are powerless against the upward and downward spirals in housing prices.
We still welcome easing and abolishment of property regulations.
But the steps should be aimed at the bigger picture - reviving the sluggish property market - and not at stimulating domestic demand.
Repressive measures of the past did not succeed in normalizing real estate prices, but instead distorted the mechanism of the free market.
Financial and macro-economic policies can work in regulating fluctuations in real estate prices in the short term, but market demand and supply should determine prices in the long run.
Regulating or deregulating the real estate market depending on the current economic reality is an outdated form of policy making we can do without.
Real estate regulation should not be considered an economic instrument.
The government should re-evaluate all property-related rules and lift those that are punitive or in place to control prices, with the goal of bringing normal life back to the real estate market.