A clueless governmentApartments rented on jeonse, or long-term deposit, contracts continue to get more expensive. Jeonse prices rose for the 102nd week in a row. The trend has continued from the first week of July 2019 through the first week of this month. Unless the Moon Jae-in administration changes its real estate policies, the trend will not change. If the liberal administration insists on elevating the appraised value of apartments, raising real estate taxes and controlling demand instead of increasing supply, a jeonse crisis is inevitable.
Regrettably, the burden directly falls on lower-income people and the young generation despite the government’s promise to stabilize the real estate market. Instead of dreaming of owning a home, these vulnerable classes are struggling to find jeonse contracts they can afford. Worse, the upsurge in jeonse prices could trigger a further spike in sale prices of apartments across the country.
Everyone knows the reason for the real estate fiasco. The government was bent on regulating redevelopment of buildings and complexes through a series of anti-market policies. A shortage of apartment supplies only fuels hikes in prices.
On top of that, the government continued raising taxes such as the transaction tax, property ownership tax, and the comprehensive real estate tax for the rich. The government pressured owners to sell extra apartments, but even single-home owners could not avoid the shocks due to its rapid lifting of the appraised value of their apartments. As a result, many homeowners must pay up to 30 percent higher ownership taxes.
Single-home owners can hardly move to other places due to higher transaction taxes. Multiple home owners chose to hand over their extra homes to their children or not to sell them. The 102-week increase in jeonse prices is a result of policy failure. Due to low interest rates, housing prices are bound to rise. But the government’s anti-market measures helped real estate prices rise further.
In a speech marking his fourth year in office last month, President Moon Jae-in admitted his administration’s mistakes. Yet the government is still sitting on its hands. It has ignored the public’s pain over the last two years. Is the government really clueless about the course change needed now? We urge it to stop its dangerous policy experiment immediately. Otherwise, the jeonse crisis will get even more out of control.