Japan, Korea, China: Three peas in a pod

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Japan, Korea, China: Three peas in a pod

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On April 1, the housing registration agency in Beijing was crowded with people trying to buy and sell houses. One complained that the 20 percent real estate transfer income tax was too much. Last weekend, the municipal government announced a strict plan to discourage real estate speculation. Single residents can own only one house and the transfer income tax went from 1 percent of the sale price to 20 percent of the profit from the transaction.

But why did Beijing citizens rush to the registration agency? They would still have to pay the same tax rate. “As time goes by, sellers will include the amount of tax to be paid in the housing price, so we have to hurry,” said one man. Chinese authorities have announced dozens of plans to fight real estate speculation that has been rampant since 2005, but the market has adjusted to changes and continued to go up.

“The tax increased to 20 percent, but specifics have not been announced. If I register soon, I may be able to pay less,” said the man. It was not determined whether the tax would be based on the sale or listing price, and how transfer profit would be calculated. The first day of the new real estate policy reported by Chinese media seems so familiar. Many Koreans would say, “That’s what happened in Korea 10 years ago.”

On the same day, the Korean government announced a stimulus plan for the stagnant real estate market, calling it “normalization.” It included unprecedented drastic measures, including exempting the purchase of existing units from the transfer tax for five years. But the response has been lukewarm. I asked a friend knowledgeable in the real estate market for the last 30 years. “The mentality is dead, so no prescription works,” he replied. When I was not fully convinced by his answer, he added, “Who knows how the National Assembly will change the plan?” Indeed, no one knows if the new policy will ever be enacted.

Also on the same day, some Japanese media reported on the effects of Abenomics. One said the real estate market had begun to respond. Leases in downtown Tokyo are rising fast, and new developments get many inquiries. These reports were infused with the expectation that the two lost decades may be finally over. What would Japanese say if they saw Korea’s real estate measures? They may think the same thing happened 10 years ago in Japan.

E. H. Carr said history flows from the river of the future, through the present, then to the past. If you replace history with real estate, we may say, real estate flows from Japan, through Korea and then down to China. How about economy, politics, society and nation? On these questions, the government has always said, “Korea is different from Japan,” or “there won’t be a ‘lost decade’ for Korea.” Are we sure about that?

*The author is an editorial writer for the JoongAng Ilbo.


by Yi Jung-jae

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