Property matters

Good news has finally come to Korea’s long-moribund real estate market. According to the Korea Appraisal Board, a government-run real estate organization, the prices of houses and apartments rose by 0.24 percent on average in January compared to the previous month. Real estate information companies also reported that a total of 4,668 apartments were traded in Seoul last month - more than a quadruple increase from 1,134 a year earlier. The increases are clear signs of a rebound in the property sector at the beginning of 2014 after years of retrograde taxes, which were designed to stop speculation, kept it in a deep freeze.

An increasing number of real estate analysts expressed cautious optimism about the future of our property market. According to a survey by KB Financial Research Center on 316 real estate dealers across the country, more than half (56.8 percent) expected housing prices to go up this year.

Global investment banks like Nomura Securities and Goldman Sachs also came up with optimistic predictions that Korea’s real estate market will recover in a noticeable way. They are pinning their hopes for a rebound on a series of government measures to resuscitate the market, such as the permanent reduction of the real estate acquisition tax, the elimination of capital gains tax on sales of properties, and the deregulations on housing reconstruction - all of which passed the National Assembly at the end of last year. The measures all had a positive impact on the estate market.

The government’s measures to boost our real estate market fell short of earning the people’s trust due to frequent vetoes at the National Assembly. As a result, whenever the government announced plans to lower acquisition taxes, the market reacted in a negative way; rather than growing, it shrank. The government-proposed bills that passed the legislature last year were actually nothing new. For instance, the previous Lee Myung-bak government, too, enacted a law aimed at scrapping comparatively heavier taxes on sales of assets by owners of multiple properties, but it delayed the law’s implementation year after year due to hostile public sentiment. Apartment remodeling, which is allowed by the new law, can hardly serve as a strong impetus for the overall recovery of the property market, except for some companies in the construction sector. Yet the real estate market reacted positively this time thanks to the Park Geun-hye administration’s efforts to clear all the uncertainties involved.

Politicians must do their best to revitalize our real estate market. People’s lives cannot be enhanced by rhetoric alone. What counts most is whether a government policy can bring tangible results. We urge both the ruling and opposition parties to hurry legislation to reinvigorate the market.