Real problems with real estateThe government has come up with another set of measures to perk up the real estate market, after six such measures last year. It obviously thought it should try new actions as the market remains stubbornly in the doldrums. This time, the measures are more aggressive.
It lifted a strict cap on three districts in Gangnam, southern Seoul, crossing them off the speculative watch list. Most of the housing-related restrictions have been scrapped. The government, in short, has done what it can to liberalize the market.
But the property market is unmoved and consumers as well as market watchers are skeptical of any effects as a result of the new easing.
The authorities have not taken any initiatives to stimulate the demand side, such as removing the debt-to-income ratio or loan-to-value ratio guidelines on mortgages. Nor did it offer tax incentives such as a cut in property purchase taxes.
There are many factors behind the prolonged slump in the real estate market. Along with various government regulations, an overall economic slowdown and demographic changes have all played parts in depressing housing prices.
The succession of government interventions were of little effect due to such structural problems. The government should come to grips with the idea that policy intervention no longer can be useful or effective.
It should instead change its entire perspective on the real estate market and policy making. Instead of focusing on housing prices, the government should endeavor to keep supply and demand stable.
It should not dance to the price fluctuations, but draw up policies with a long-term perspective to keep supply and demand smooth.
It must first of all deregulate housing supplies to the private sector to vitalize the market and keep intervention at a minimum, regardless of changes in housing prices.
The government should consider eliminating the subscription system in apartment supplies and keep its hands off the market.
It should only concentrate on state-funded supplies for the low-income and homeless classes.
Private housing should be left entirely in the hands of the private sector while the government sticks to measures purely related to welfare.
Consumers should also dampen their hopes of getting rich through real estate purchases by exploiting government real estate policies.