Respect market principles

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Respect market principles

On Wednesday, Prime Minister Chung Sye-kyun ordered senior government officials to sell their “extra houses as quickly as possible.” If they own several apartments, the public will not have any reason to trust the liberal Moon Jae-in administration’s real estate policy, he said. Moon’s Chief of Staff Noh Young-min joined the move by pledging to sell his apartment in Gangnam District, southern Seoul. On Tuesday, the ruling Democratic Party (DP) began to study how many residences each of its 176 lawmakers possesses. Currently, 40 out of them are multiple homeowners.
Repeatedly vowing to control soaring real estate prices, the government has forced members of the general public to sell their extra homes through the implementation of higher taxes. But high-level officials and DP lawmakers holding onto their apartments believe the value will rise. After the public felt betrayed, the government hastily took action. But it really should go back to the basics and give hope to common folk so they, too, can own a home.
The government is preparing its 22nd set of measures to put the brakes on real estate prices by raising both acquisition and transaction taxes, which already backfired in the Roh Moo-hyun administration. The government is suspected of attempting to raise tax revenues to fill state coffers emptied by massive spending.
The fiddling with taxes only helps rich people. Real estate inheritances increased by 49 percent in Seoul compared to last year after a transfer tax soared to the level of the inheritance tax. Rep. Yoon Ho-jung, a senior lawmaker of the DP, faced a strong public backlash after giving an apartment to his son.
The Moon administration has made real estate policy mistakes again and again over the past three years. Its 21 sets of measures have not worked. Restricting mortgages, regulating more areas and raising taxes merely lifts home prices and rents. In the meantime, the median price of apartments in Seoul skyrocketed by 52 percent.
And yet, the government turned away from increasing supplies through the redevelopment and reconstruction in Seoul and lowering transaction taxes, along with a relentless campaign to stigmatize a certain class as a “speculative force” and imposing more taxes and regulations on the rich. If this is not the politics of “divide and rule,” what is it?
Imposing tax penalties on multiple homeowners cannot give hope to ordinary citizens. The same applies to the order to top officials to sell extra houses. The government must dramatically increase supplies in areas where people want to live and cut transfer taxes to meet demand. If it ignores market principles and divides the people, it can never solve the housing conundrum.
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