Surreal real estate policies
The proverb “Don’t burn your house down to scare the mouse away” should be applied to the government and its heedless pursuit of real estate policy. Starting with loan regulations in June 2017, the Moon Jae-in administration has so far drawn up 23 sets of real estate measures. More are to come. Can this be real?
Oddities stemming from the real estate policy fallout are too many to mention. The biggest farce involves Deputy Prime Minister for Economic Affairs Hong Nam-ki in charge of the real estate policy. Without intending to do so, he set the prime example about how contradictory the new rent policy can be. He himself had to dispose of his extra home subject to a tax surcharge under reinforced regulations, but his tenant refused to move out citing his right to extend rent terms under the new Tenant Act. As a result, he had to pay extra incentive money to persuade the tenant to move out. If the top policymaker also had to pay extra to escape the conundrum, the government can easily imagine the agonies of common people.
The suffering has spilled over across the country. The catastrophe stems from the politicization of real estate policy by pitting Gangnam, southern Seoul, against all other areas. Under the pretext of aiding common people’s desires for homes and reigning in wealth polarization from property ownership, the government has destabilized the housing market by forcible suppression on demand. The antimarket measures have backfired. Hopes for owning a home have been shattered.
Yet the government remains oblivious and stubborn. President Moon repeatedly vowed to use all possible means to bring down housing prices. Now he claims he can stabilize the rent market. The government is readying to trot out its 24th set of real estate measures. It is expected to propose tax incentives on monthly rents.
Under its 10-year outline on home ownership taxation, the government plans to raise its official valuation of houses that becomes the basis for taxation to 90 percent of the market value in appraising apartments in 2030. The measure can take effect under an administrative order and does not require legislative approval.
Since a single homeowner is no exception, every homeowner would come under heavier tax. The appraisal value of properties becomes the basis for property-related taxes as well as other social taxes like national health insurance and basic pension. The government won’t stop its reckless control over properties. People must keep their eyes open before more abnormalities sprout.