Don’t be the fool in the shower

“Korea is truly amazing. It celebrates a structure for being pronounced unsafe!” murmurs the elder brother of Park Dong-hoon, a structural engineer in the 2018 Korean drama series “My Mister” played by the late actor Lee Sun-kyun. The elder brother assumed the building must have been well built as it passed a safety test. But after learning from his younger brother that the banner just celebrates the permission of reconstruction as the building was declared unsafe, he is confused. The conversation reflects the paradoxical meaning of the construction safety test in Korea.

The Yoon Suk Yeol administration announced measures to boost the real estate market through drastic deregulations on residential building reconstruction and redevelopment and tax breaks. Under the new scheme, a residential building aged 30 years or older can be reconstructed without a state-administered safety test. It can be rebuilt even if the structure is deemed safe — as long as it suffers inconveniences related to shortages of parking space, noise protection or plumbing issues.

The move can benefit 950,000 households across the country. By dropping the safety test mandate, reconstruction can be realized 5 to 6 years faster. The purchase of small units of newly built multi-residential buildings can also get tax benefits. Unlike the past, the latest real-estate stimuli measure includes incentives to stimulate demand.

In a public debate following a briefing earlier this week on the plan by the Ministry of Land, Infrastructure and Transport, the president promised to free the real estate market from political ideology to look at it in the context of rights to properties. “It is wrong to punish people for owning multiple homes with penalty taxes,” said Yoon. Removing political color in real estate policy and appreciating multiple homeowners as suppliers of private housing would be welcomed by many. Permitting reconstruction of buildings only when they are deemed unsafe is an antiquated policy that restricts civilian rights to properties and their choices, as well as degrading living standards.

Redevelopment and reconstruction of residential buildings were strictly regulated in fear of fanning housing prices in inner cities. Deregulation came in time as the housing market severely slumped. The banner congratulating the passing of the safety test in the drama means residents can earn money through redevelopment. But people’s aspiration for greater wealth can build up when the interest rate goes lower and rock the apartment market in Seoul, coupled with the easing in reconstruction permits and tax benefits.

High housing prices are a primary reason for the low birthrate in Korea. In order not to be the “fool in the shower” by flip-flopping between hot and cold water, authorities must steer the policy well so that it does not cause any unwanted side effects in the volatile housing market.