Real estate dilemma for presidents
CHOI HYUN-JUThe author is a life and economic news team reporter of the JoongAng Ilbo.
The dictionary meaning of “house” is “a building built to live and be protected against cold, heat, rain and wind.” However, in Korea, a house is not just for living but also for buying. It is a place to live, often one’s entire fortune and a key means to make money. Real estate accounts for 79.9 percent of the average household’s assets. Past presidents have paid special attention to real estate policies.
Former president Roh Tae-woo is considered one of the “housing presidents.” Four years into office, 2.14 million units were built in the first new cities — Bundang and Ilsan — in the capital region. The supply bomb of pouring 30 percent of the total number of homes in the country, or 6.4 million apartments, in a short period of time led to considerable side effects. A shortage of construction material led to poor quality in construction, and the sloppy urban planning resulted in disastrous rush hour traffic congestion.
Former president Kim Dae-jung was given the task to overcome the foreign exchange crisis and IMF bailout. He decided to ease regulations. Sales tax was exempted temporarily, resale of ownership before moving into a new home was allowed, and the limit on apartment offering prices was removed. The housing market was revived, but speculation started.
Former president Roh Moo-hyun imposed regulations again, banning resales of ownership and tightening the loan-to-value ratio (LTV), the debt-to-income ratio (DTI) and the comprehensive real estate tax for the rich. Reinforced regulations actually resulted in a housing price hike, and in five years, apartment prices nationwide rose by 33 percent and in Seoul by 55 percent.
Former president Park Geun-hye created an environment “to borrow money to buy a house.” As the LTV and DTI were lifted to 70 percent and 60 percent, you could buy a 100 million-won ($79,840) house with 30 million won. The rising rent deposit was stopped, but Park’s policy created so-called “house poor.”
President Moon Jae-in threw “regulatory bombs.” Heavy taxes were imposed to buy, own and sell homes. When he implemented 26 real estate measures to suppress demand, housing prices surged in the areas that avoided the regulation. In the current administration, apartment prices rose by 37 percent across the country (61 percent in Seoul).
President-elect Yoon Suk-yeol also promotes real estate policies. I welcome the delay in real estate policy announcement by the transition committee, because I am tired of frequent regulations and have expectations for “proper” policy. It is up to him to decide what kind of “housing president” he will become. There are many failures by past presidents to learn from.
with the Korea JoongAng Daily
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