Stuck in the old paradigm

In a town hall meeting earlier this month, President Moon Jae-in boasted that home prices stayed mostly stable under his government. But home prices in Seoul have shot up at the fastest pace in the world during his administration. According to Numbeo, which follows data on living costs in cities and countries around the world, the value of apartments in inner Seoul gained 38 percent on average in 2018 against 2016, showing the biggest increase among 20 comparable cities. Also according to The Economist, the value of homes in Seoul rose 14 percent in 2017 and 2018, the second-biggest gain after Paris in a comparative survey on eight cities. During the same period, the average prices of homes across the world fell.

Apartments in Seoul have become “unreachable” for most ordinary people. Data from KB Financial Group showed the median price of apartment prices in Seoul gained 300 million won ($255,000) from the time Moon took office in May 2017 despite multiple and all-around tough measures to rein in housing prices. The regulatory policy aimed at suppressing demand instead of increasing supply around the inner city has backfired. Despite the price cap on new apartment offerings, prices of apartments in popular neighborhoods in Seoul continue to soar.

Moon warned of the “toughest yet measure to combat home prices,” but the market no longer pays heed. The government has trotted out measures 17 times but was completely defeated. The government still devises policies to fight speculative forces instead of respecting the demand-supply principle. Lowering transaction tax to help multiple-home owners to sell their assets is more effective than raising the ownership tax. But policymakers keep their ears stubbornly shut.

A steep rise in home prices along with sluggish employment have dampened vitality and liquidity in our society. The latest social survey showed that expectations for upward mobility were at rock bottom. Those who believe their children will move up the social ladder was 28.9 percent, down 20 percent from 10 years ago. The skepticism of ordinary people is understandable because it is impossible for a middle-income family to buy a home in Seoul.

Growth potential and upward mobility weaken as the economy becomes bigger. But a reckless real estate policy should not worsen chances. It is a sad reality under the liberal administration who promised of a better — and more even — society for all that more people no longer can dream about living in Gangnam District in southern Seoul.

JoongAng Ilbo, Nov. 26, Page 34