Deregulating the housing market

The domestic real estate market remains in the dumps. Housing prices have been plunging and transactions are rare. The prolonged sluggishness has taken a heavy toll on the realtors, construction companies and ordinary households.

Families are unable to move into a new house because they can’t sell the one they are living in. Rent prices - both short and long term - have shot up due to excess demand. But at the end of the day, those without homes are not the ones hurt the most by the sluggish real estate market.

Realtors, moving companies, architects and interior designers - a popular line of business for many self-employed people - are out of work.

Jeonse prices have also been rising. Apartment and home buying is in the doldrums because buyers are still waiting for the market to bottom out. As a result, house and apartment owners have been forced to lease out their properties rather than sell.

The inconsistencies in real estate policies that sway from harsh measures to stave off speculative buying, to deregulation to help the market must be fixed. Now that there are nearly no signs of speculation with housing prices on a downward trend, regulatory measures would be of no use.

The government last year announced aid measures to revive the real estate market six times, hoping to rein in speculative buying. But the policies failed to pump life into the market.

Many in the industry believe the regulations could be revived and strengthened at some point. The government has left an oversight cap on the capital’s most affluent area in southern Seoul - Gangnam, Songpa and Seocho Districts - and has been suspending double-taxation on owners of multiple houses without fully lifting it. Such uncertainties are scaring off potential buyers in the market.

Authorities must remove the ambiguities in real estate policies and need to formulate an entirely new approach. The government must shift its priority to stabilizing the market through supply instead of price interference.

The government should not refrain from exhibitionist and ambitious housing projects. The price caps should be scrapped and financing restrictions also must go.

The market will naturally pick up once it is sure that there won’t be any more government interference.