The government has commenced on a study to determine whether there is speculative real estate investment going on with "reconstructed apartments" in Seoul's Gangnam neighborhood. Uri Party is said to also be working on measures that would fight the same phenomenon. It is fortunate that the government and ruling party are moving swiftly to confront it in its early stages. If speculative real estate investment is going to be stopped effectively, the any such measures must be preceded by a reorganization of the legal regulations. In addition, maintaining consistency in real estate policy will also be very important.
The government needs to start by making sure taxation allows for thorough claim of gains made through such investment. If profit from speculative real estate investment can be blocked, then much of the activity can be prevented. Doing so will require legislation that would facilitate that be passed in the extraordinary session of the National Assembly this month, having failed to pass during the ordinary session. The activity cannot be stopped at the source without revamping the legal apparatus.
The proposed system of reclaiming profit from apartment redevelopment will be key in determining whether the recent signs of speculative investment spread further. The recent rise in apartment prices originated with redevelopment in Gangnam. If the plan to limit profit from rebuilding apartments is again not implemented, the rise in prices will quite likely spread to regular apartments. Some people argue that such legislation could be unconstitutional, but since only part of the profits made would be claimed we think that it would not.
Policy designed to deter speculative investment must be maintained with consistency. Everyone from the president on down to his working level people must be determined to fight speculative real estate investment. There are reasons it is hard to believe the government, if you look at how it carries out policy. A typical case would be its stance on dual collection of transfer tax for people who own more than one dwelling.
The real estate market is just starting to stretch its arms, and at a time when there are expectations about an economic recovery, after being stagnant for around a year. The situation requires preemptive measures against speculative investment so as to make sure the recent developments do not lead to the same skyrocketing housing prices of two years ago.
The Hankyoreh, 14 February 2005.
[Translations by Seoul Selection (PMS)]
[Editorial] Effective Prevention of Speculative Investment |
