[Editorial] Order in the Apartment Reconstruction Market

The government is going all out trying to establish some order in the Seoul apartment reconstruction market. The police are investigating irregularities in the reconstruction process in Mapogu's Seongsandong, the Jamsil Siyeong apartments, and now the whole of the Seoul. The Ministry of Construction and Transportation is investigating at the Jamsil housing authority apartments and apartments in Apkujogdong and Jamwondong. The plan is to force projects to start all over again if the government discovers serious procedural deficiencies. The idea is to bring down the price of the rights of apartment ownership even if that is what it comes to, because it would be hard to stabilize housing prices without putting a stop to the vicious cycle that occurs when high apartment prices cause area prices to rise, leading to higher apartment prices.

There are those who criticize the government by saying it is going to unreasonable means. However, you actually get the sense that this is late in coming because the problem has always been in demand of intervention. Apartment reconstruction sometimes involves bribes and sometimes involves gangsters, and the suspicions about price fixing are nothing new. A good place for government authorities to begin would be reflection on what it was that led things to what they are today. Some argue that the government's actives go against market principles, but we do not think that is the right view to be taking. Market principles function properly when there is enough smooth modulation and transparency in supply and demand to be able to expect workable competition. It would be hard to say normal market principles are in play in the greater Seoul real estate market. Furthermore it is usually the case that companies with monopolies over the situation determine the cost of reconstructed apartments. It is irresponsible to suggest things should be left to the market when the market is incomplete and full of illegalities and circumventive tactics.

There are still those who say a simple crackdown will not resolve the problem. The strict fact of the matter is that in the Gangnam area almost all of the supply of quality apartments is produced through reconstruction, and no one can deny that ultimately the way to stabilize prices will be to increase supply. That is why there needs to be a comprehensive approach; that which needs correcting should clearly be straightened out, while normal reconstruction should continue without complications.

The Hankyoreh, 27 April 2005.

[Translations by Seoul Selection (PMS)]