Bungling provoked rent crisisThe government unveiled an urgent measure for the stabilization of home lease costs on Sunday. Although it’s the summer off-season, there are some signs that leases will surge, especially in the Gangnam region of Seoul.
As tenants have finished moving into large reconstructed housing complexes in the southern part of the city, leaving a diminished supply of new apartments, homes for lease in Seoul saw at least a 5 percent increase in prices this year.
The stabilization measures include an increase in the size of radiant floor heating for small and mid-sized officetels and an expansion of new housing tailored to suit the demand of inner-city residents. The pool of loans for employees and civilians will be expanded by 600 billion won ($483 million) to 800 billion won. However, doubts linger about whether such short-term measures can cool the market.
This upheaval has done serious damage to the reputation of the Lee Myung-bak administration. There is nothing more dreadful to average citizens than soaring home rental prices. In addition, complicated policy stances have caused an upheaval in some aspects.
As the government lifted some restrictions on real estate suddenly to cope with the economic crisis, reconstruction and redevelopment of new towns has been underway at the same time, resulting in a sudden increase in rental homes.
This year, 30,000 houses in Seoul, 60 percent more than last year, will be demolished to make room for new construction. The authorities clearly hope to boost the construction industry, but in doing so they have increased demand as well, worsening the rent crisis. That in turn provokes concerns about an additional rent crisis in 2012.
It is never desirable for the real estate market to undergo such instability, and the government should devise more effective measures to aid the public when it faces a rental crisis.
First, for a long time the heating floor space in officetel studios has been only slightly larger than a piece of paper. We should explore more ways of transforming officetels for residential purposes and offering a higher standard of living.
The government’s mid- to long-term measures for housing supply should be more carefully revised. We should work so as not to reduce the housing supply, taking into account changes in the market in the next two or three years.
As for reconstruction, redevelopment, and new towns, the central government and local governments alike should be actively engaged in adjusting management and the timing of demolition or reconstruction with a view toward dispersing rental demand.