The truth about real estate
The author is an editorial writer of the JoongAng Ilbo.
“The age of making money through real estate is over.” This was a key policy direction of the Moon Jae-in administration, but it didn’t make sense from the beginning. The real estate investment by former Blue House spokesman Kim Eui-kyeom explains the reason. He used his wages and wife’s pension to pay the interests on a 102-million-won ($89,660) mortgage.
Instinctively — from experience and from how things work in life — he knew how things worked. The 11 real estate speculation prevention measures introduced over the 22 months of the Moon administration go against the market. More directly speaking, he knew well that the age of making money through real estate was not over.
During Korea’s rapid economic development, anyone had a chance to make money through real estate. When Kim was in his 30s, anyone had a chance to buy a new development. Of course, things have changed: there are few opportunities, as there is no more land to build apartments in Seoul. So when redevelopment is announced, the apartment price soars. The Moon administration has dropped a multi-directional regulatory bomb to prevent it. Loan limits were tightened, collection of surplus gains from redevelopment were restored, and the appraised value of the land was adjusted.
It has nothing to do with working-class people. They don’t have the money or information that Kim has. They also cannot get basement and rooftop units that are unlikely to yield rental income recognized as commercial units. Is there any greater self-righteousness? The government repeatedly stressed that it would not be good to buy now. Key officials claimed that the market would not triumph over the government policy, the price should go down further and owners of multiple houses should sell.
Working-class people should be angry at the deception. The real estate is still a pathway to accumulating asset, but the government said it wasn’t. Many homeowners began from renting, bought a small unit and moved to bigger units to make money. Compared to stocks, real estate is more powerful. Stocks cannot be a consistent means of accumulating assets because you don’t know which stock will go up. U.S. investor Peter Lynch recognized the stability of real estate. He argued that people buy houses after shopping for at least six months, but no one chooses stocks so carefully.
Having never owned a home in 30 years, Kim chose real estate. As a public official, he represented the administration’s policy experiments, such as its tight real estate policy, minimum wage increase and nuclear phase-out — but as a person, he believed in the market: and he acted upon it. He knew the reality, that no government can win over the market. Kim is not the only one thinking that.
The administration said real estate investment is a deep-rooted evil, but many of the people in the administration are real estate owners. Choi Jeong-ho, who withdrew his nomination as the construction and transportation minister, made 2 billion won from selling three houses. Park Young-sun, the nominee for minister of SMEs and startups, owns three houses. Former policy adviser Jang Ha-sung, who lives in Gangnam, had said that not everyone needs to live in Gangnam. The price of his house went up by 500 million won. This is self-righteousness at its best. What is comforting to me is that they confirmed the truth about real estate.
JoongAng Sunday, April 6, Page 30
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