The government has produced another real estate plan. It is mostly about reorganizing regulations on apartment "reconstruction" projects, strengthening regulations on home secured loans so that they are based on a concept of debt to income (DTI), and encouraging lower purchasing rights by supplying lower land lot prices. It is unfortunate there is nothing that will have an immediate effect on the supply problem currently experienced in the housing market. Still, these measures are significant in that the government is establishing the framework that it should have long ago.
Reclaiming "development profits" from "reconstruction" is clearly progress, in that it formalizes the principle that you cannot pocket the returns from land development. Slower reconstruction can lead to a so-called "bubble effect." But that is something that has to be endured, if you think of the public demand for stability in the reconstruction market, which has been the epicenter of unstable housing prices, and of the positive effect better public use of land would have on the economy.
It is a step in the right direction to make it so that people are only given loans for expensive homes within the range of what they can repay from their regular income. Financial authorities naturally should exert control over the excessive issuing of secured real estate loans, which are a potential destabilizing factor for the financial market. There are some who ask if this is going to discourage low-income families who seek to purchase their own homes. That is not convincing, however, because there are no obstacles unless housing is expensive, and purchasing homes with absurd loans in the hope of collecting speculative income is not exactly what you call normal economic activity.
These plans come as follow-up measures to the August 31 Real Estate Measures, and are considerably improved from what he had before. Key to their success will be consistency and public confidence. If the real estate market becomes stagnate, or if there is a change in government, people expect policy to change and that by itself makes measures such as these half as effective. For that reason the ruling and opposition camps need to share the same understanding when it comes to real estate policy.
The Hankyoreh, 31 March 2006.
[Translations by Seoul Selection]
[Editorial] March 30 Real Estate Measures: Inadequate But Meaningful |
