Curbing real estate speculationAs many as 3,000 individuals sold ownership rights in apartments under construction more than three times in a year and half to capitalize on government deregulations on real estate trade and boon in supply, according to investigation by the Ministry of Land, Infrastructure, and Transport. The ministry requested for tax scrutiny on 200 suspected of illicit trade by undercutting the transaction value on documents to lessen tax burden. Fixing the price on paper is not unusual as 50 percent profit gain tax is levied when the ownership right is sold in less than a year of purchase. But what the ministry has uncovered in recent probe may be the tip of an iceberg.
Unregistered realtors are usually behind illegal or speculative real estate trade. They borrow accounts for apartment purchase with higher winning ratio and profit by selling the rights at higher price. Since the government scrapped the limit, one bank account allows multiple subscriptions. The winner of the draw can earn thousands of dollars in just a few days especially for new apartment supplies in popular neighborhoods. Even ordinary people are randomly bidding in new apartment tender for easy money. The government has ended up fanning real estate speculation.
Actions should have taken upon discovering abnormal signs, but the government – possibly intentionally – has not done so. The economic team under former deputy prime minister of economy Choi Kyung-hwan lifted various regulations on real estate trade and loans as an easy way to stimulate domestic demand. The government is suspected of overlooking the overheat signs. Household debt snowballed upon easing in mortgage loan regulations.
The real estate market has already begun to show signs of fallout from reckless expansion. Unsold housing supplies totaled 60,000 as of the end of June, up 8.2 percent from the previous month. The industry fears administrative action and crackdown on speculation could bring about chaotic disruption and end to the market.
But still real estate speculation must not be tolerated. Oversupply has already tipped over a dangerous level. There would be housing supplies for 700,000 households available across the nation in 2017-2018, the largest-ever since 1990s. In the first half alone, 350,000 supplies were licensed for construction, highest since 1991. The subscription system that sets no limit in re-bids must be fixed, and the government should consider selling apartments after they are completed in the longer run. It must be extra subtle as to rein in speculation without dampening the market and aggravating the fragile economy.
JoongAng Ilbo, Aug. 2, Page 30