At the boiling pointThe fervor over new apartments has hit the boiling point. The bursting will come any minute because policymakers have kept to the sidelines. The new offering in Mapo for 395 homes drew 29,545 bidders, a record rate in western Seoul.
Another offering in Dongtan on the outskirts of Seoul had a competition ratio of 458 to 1. The frenzy in southern Seoul has caught up with the northern part and beyond the capital.
The real estate market has been brewing over the last two years due to easing in loan and home trade regulations. Economic ministers have turned a blind eye and the chief economic secretary for the president has kept mum.
Despite the frenzy, authorities maintain that the market conditions do not demand radical actions such as designations for speculative zones. The side effects are serious. The apartment auction has turned into a lottery zone.
Backdoor deals to resell ownership rights with premiums are rampant. The resale ratio on new apartments has exceeded 30 percent. Some invest, eyeing the gap in rent and home sale prices. Trillions of won worth in special loans reserved for working-class home purchase joined the speculative investment.
At the end of the day, it would be people who would pay for the fallout with killer rent prices. Over the next two years, 760,000 new homes will be finished.
Because of the sudden flood, rent and home prices could crash. Those who invested in homes entirely on debt could become house-poor and all their income could go toward financing. Economic data suggests real estate demand has sustained the domestic economy amid poor consumer and corporate spending. But the ill effects are bigger as it could end up worsening consumption.
We plead to the economic minister to come up with immediate actions to navigate an emergency landing to prevent a catastrophic crash of the real estate market.
The ministry should aim for a clampdown in speculative forces while protecting genuine home hunters. They have no time to lose.
JoongAng Ilbo, Oct. 21, Page 34