How to respond to a real estate crisis
The author is the deputy editor of the economic policy team of the JoongAng Ilbo.
The Moon Jae-in administration is to announce its 23rd real estate measure soon — probably on August 4. But the market’s expectations are not high. Last week, Hong Nam-ki, vice prime minister for the economy, promised to come up with a plan to expand housing supply by the end of July by establishing a joint team with related ministries and other parties involved. But it became an empty promise. Hardly working as one team, ministries, local governments and the ruling party mentioned different ideas.
Korea faces a real estate crisis. According to the 2019 national balance sheet, real estate makes up 76 percent of household assets.
So the real estate crisis means a crisis for the ruling party and the Moon Jae-in administration.
Professor Timothy Coombs of Texas A&M University is a global crisis response expert. He wrote “Code Red in the Boardroom,” citing 19 crisis examples and proposing solutions. Coombs argued that the most important part of resolving a crisis was understanding the type of the crisis. Depending on the type, the solution varies dramatically.
He divides crises into three categories. First, if it is an attack from outside, you should emphasize that you are a victim. It is important to change the image of the organization, company or government positively and create a better reputation. Second, if it is an unintended accident, you should emphasize that it is not the fault of the organization itself and present a response quickly. The last and the worst is a crisis that is the fault of executives or employees, and the solution is simple: promptly acknowledge responsibility and apologize. It is the only solution, he said.
The Moon administration seems to believe that the real estate crisis is an external attack by wealthy speculators (Category 1), the result of excess liquidity and the consequence of mistakes of the past administrations (Category 2). The government has repeatedly warned rich speculators with 22 sets of measures. But the current crisis is somewhere between Category 2 and Category 3 — mistakes of the real estate team in the administration. Alternating between misdirected measures, the government has stirred public opinion and real estate prices. It is leaning toward Category 3 now. A prompt apology and acknowledgment of accountability is the way to go. Yet there are no such signs from the government.
Coombs wisely predicted such situations. When faced with a crisis, members of an organization tend to go through four stages of reaction: rejection, anger, compromise and acceptance. I hope the government’s real estate team, which remains in the phases of rejection and anger, would move to compromise and acceptance pretty soon.