Slow the real estate surgeApartment prices in Seoul are rising at a menacing pace. Demand is so high that it is almost impossible to find a vacancy in an apartment complex of over 5,000 units in southern Seoul. The phenomenon has spread to northern Seoul and satellite cities as well.
Home prices have shot up due to lack of supplies. In the posh south Seoul neighborhoods of Banpo and Daechi, home values have jumped by more than 100 million won ($89,389) in the last couple of months.
Government measures to ban the sale of ownership rights in new apartments and strengthening mortgage-related loan regulations in June have failed to stamp out the extraordinary activities in the housing market. The policy to rein in speculative demand by regulating financing means has not worked.
Even though the apartment market is sizzling hot, the Bank of Korea has added fuel by issuing a report that says that the demand for apartments and homes will continue to rise in Korea, unlike Japan, regardless of the aging population.
The real estate market is shaped by sentiment. Apartment values in Seoul are soaring on expectations of continued liquidity from ultra-low interest rates. The government believed the market could stabilize upon a clampdown by speculative forces. The market stays unfazed, as the previous liberal government under President Roh Moo-hyun failed to bring down the prices regardless of a series of hard measures.
The government must come up with more fundamental and effective measures. It must address the supply side as much as the demand side. A fair and just society hinges on real estate measures.
JoongAng Ilbo, Aug. 1, Page 30