Ending market confusion

President Moon Jae-in has stepped into the heated argument over lifting greenbelt zones in Seoul to increase residential space. “They should be “preserved for the future generations,” he said.

The issue has dominated political and real estate scenes for a week, with different comments coming from the Blue House, ruling Democratic Party (DP), Prime Minister’s Office, deputy prime minister for the economy and land minister. Even the justice minister joined the debate, expressing opposition to lifting a ban on development of greenbelt zones. The controversy is expected to die down after the president gives the final say.

A policy that can influence the market should not be volatile. Yet the government and DP members deepened the confusion by adding personal comments. Their recklessness has damaged public trust in the government’s policy.

The lack of leadership in real estate policy has been the biggest cause of the confusion. Land Minister Kim Hyun-mee has long lost market confidence. She has shown few regrets, despite the failure of her 22 sets of real estate measures.

Policies aimed at reinforcing regulations and raising taxes have stoked outcries from taxpayers. The market has come to believe that home traders can make money if they do the opposite of what the government says.

President Moon must clarify who commands the government’s housing policy on issues ranging from housing supplies to financial regulations that can influence housing values. He must take responsibility for all public policies relevant to real estate market, just as Jung Eun-kyeong, director of the Korea Centers for Disease Control and Prevention (KCDC), is responsible for handling Covid-19.

The government must quickly search for other options to increase housing supplies in Seoul now that greenbelts cannot be touched. The state-owned golf course in Taeneung is seen as an option for residential development.

To stabilize soaring housing prices, supplies must meet demand. Floor-to-area ratios (FAR) should be revised to allow more space in redevelopment zones. Seoul’s FAR remains about half the ratio allowed in big metropolitan cities like New York and London. Taxes also can be imposed for the extra space. The ratio can be lowered when population decreases.

Capping future profits can serve as a means to stabilize prices, which will never be tamed through punitive taxing.