Accurate assessment firstThe real estate market has turned fiery, defying authorities’ expectations that their set of toughened regulations would rein in home and rent prices. According to market watchers, apartment prices in Seoul have shot up, doubling or even tripling from the levels before liberal president Moon Jae-in was elected. Some redevelopment sites in southern Seoul gained 50 million won ($44,683) per apartment in a week.
Interpretations on the phenomenon are mixed. Some claim it to be the last bubbles forming from years of loose monetary and financial policies, while others point to a sudden rush of demand before tougher taxes are implemented under the liberal administration. Some say housing demand has revived after political uncertainties have been removed.
But there seem to more complicated factors behind recent market activities. Prices of apartments outside southern Seoul that are preferred by non-speculative home seekers have also gone up while values in places outside Seoul remain subdued.
Household debt closely linked to the real estate market also has been picking up speed in growth. Debt has increased by more than 17 trillion won in the first three months to hit 1,360 trillion won as of the end of March. Loans increased more from the non-banking sector after tougher loan regulations were imposed on banks. Consumers were seeking loans for housing regardless of higher interest payment. Some say it is the natural sign of an economy on a rebound or speculative forces ahead of toughened regulations.
The Korea Institute of Finance advised authorities to tighten the caps on loan regulations such as the loan-to-value and debt-to-income ratios. That could be an option since most agree on the worrisome foams building around the housing market.
But an objective and accurate assessment should be done first. The real estate market is a complicated and huge market. It is moved not only by economic and market conditions, but also by data as a result of past policies and consumer confidence in the economy and government. All the market relationship and conditions must be thoroughly studied before a new measure is introduced if the government really wants to realize the president’s promise to deliver policies to ease home anxieties without side effects.
JoongAng Ilbo, May 29, Page 34