Go beyond regulations
Published: 17 Nov. 2021, 19:21
The data suggests Korea is the sole country with household debt outsizing the economy. The growth rate is a bigger worry. Household debt gained 6 percentage points on year, faster than Hong Kong, Thailand and Russia.
South Korea may be the fifth most innovative country according to the 2021 Global Innovation Index ranking by the World Intellectual Property Organization, but its people are the most indebted in the world. The biggest reason lies within its soaring real estate prices, according to the IIF. The multiple policy failure from 26 sets of regulatory measures has pushed housing prices sky-high. People without homes became relatively poor. Panicky home buyers and people scrambling to get loans for increased rents had fanned household debt.
The government and ruling party still blame speculative forces and a pandemic-triggered global asset frenzy for the spike in housing prices. Everyone knows the housing prices started to climb from 2017 when the Moon Jae-in administration took off. The government more or less is admitting to its impotence by laying the blame on speculative forces. Regulatory measures on top of excess liquidity have fanned housing prices and household debt.
Sadly, an exit can hardly be found. To contain household debt, the excess liquidity must be rolled back. The normal procedure is to raise interest rates and regulate loans. But rate hikes could push indebted households and companies over the edge. Due to tightened loan regulations, tenants cannot find money for rent during the Autumn moving season.
The answer also lies in real estate. Yet the government cannot shake out its regulatory dogma. When supply cannot be resolved due to the delay in urban development, it must come from existing residences. But landlords cannot sell their apartments due to heavy capital gains tax. To solve the world’s highest household debt and soaring housing prices, the government must find an answer beyond regulations.
with the Korea JoongAng Daily
To write comments, please log in to one of the accounts.
Standards Board Policy (0/250자)