Totalitarian property policies

Presidential aspirants from the ruling Democratic Party (DP) are running on anti-market real estate policy platforms. They wish to control housing prices and even restrict trade. Such ideas are unthinkable in other market economies. They are competitively strengthening regulations to aggravate apprehensions of the people who are already agonized by runaway housing prices. If any of their harsh policies is realized, the market could face even greater unrest than now.

Gyeonggi Gov, Lee Jae-myung, who leads the polls, proposes to establish a public entity on housing management that would set floors and ceiling for housing prices. Rep. Yoon Hee-sook of the main opposition People Power Party criticized the platform that treats apartments like rationed crops. Lee also wants to create a regulatory authority on real estate to punish unfair housing trade. The idea is anti-market as it regards real estate as a subject for state control instead of leaving it to the market. Former prime minister Lee Nak-yon, who trails Lee in polls, vows three laws that would regulate private property ownership, force profit-sharing and up the real estate ownership tax. If the ceiling on land ownership is set, an individual can own just up to 1,320 square meters of land in the capital region. Such idea could only exist in North Korea. Even China does not impose such curb on private property ownership. Beijing has been regulating price levels due to sharp appreciation in housing value, but still leaves the trade to the market.

Their ideas could be dismissed even in totalitarian countries. They could fan volatility in the housing prices which have become unrestrained from multiple regulations over the last four years. Even without their help, the market has been heavily imbalanced due to dire supply shortage. Because the government has tightened supply, licensing volume in private apartments in Seoul that averaged at 90,000 a year in 2017 fell to 60,000 in 2018 and 56,000 in 2019. The licensed volume becomes available two to three years later. New apartments will be in short supply until next year.

Due to spikes in housing prices, more are moving out of Seoul. As result, housing prices in satellite cities of Goyang, Gimpo, Euijungbu, and Namyangju in Gyeonggi Province shot up more than 40 percent over a year. While admitting the failure in real estate policy, president-hopefuls from the ruling party want to up the regulations. They are missing the point if they think they can tame the market through stronger regulation.