President Roh Moo Hyun's comments are again the subject of controversy. "All of the profit from the housing market must be shared by the people," he said at a meeting about government rental housing three days ago. "Creative income should be given the proper recognition, but let's not recognize speculative income at all." Some of the conservative media with an oligopolistic hold on the newspaper market and critics who believe in market supremacy are criticizing him for those words. Those conservative papers have been criticizing him in editorials for supposedly being against the ownership of private property, or say they are worried his dangerous perceptions will shake our economy at its foundation. "How is that different from the socialist system," asks one paper, and another talks as if income from speculative housing investment and profit earned on the stock market are the same and charges that claiming income from speculative housing investment is anti-market.
The president's expression was indeed crude. The chief executive needs to be prudent in his choice of lexicon. Still, the people probably understood what he said to mean to be thorough about the taxation of income resulting from speculative investment. Cheong Wa Dae explained as much. It is the only interpretation possible also because even the president does not get to deny the right to own private property or have the state claim speculative income when there is no basis for doing so in the tax laws.
We have no interest in whether people displeased with the current government pick at the president's words to criticize him or not. When that is the position taken on the housing market by the big newspapers that have a major influence over the country, however, then it is a serious matter. Housing cannot exist separate from land. In that sense housing is, while not quite as much as land, still property that is both private and public in character. There are local limits to how it can be supplied, and it cannot be built in a short period of time even when there is demand. In the case of Seoul's Gangnam, it would be one thing if the rising prices stayed in that one neighborhood, but it is common to see prices immediately follow suit in other areas. It is an excessive expansion of the market to compare the housing market, which is experiencing growing market failure because speculative investment factors in in addition to other problems, to the flow of information or the stock market, which is as close as you can get to perfect competition between supply and demand.
Income from speculative housing investment is more of a negative influence than simple unearned income because it transfers the income of the common people and other individuals who lack housing to those who own multiple domiciles. Speculative investment in housing and other types of real estate is holding back many of the government's economic policies. The same conservative newspapers have been taking as similar stance about recent measures aimed at stabilizing housing prices. When it comes to measures for the apartment reconstruction market they have focused on the side effects instead of the positive ones, and then given a lot of coverage to the view of some observers that regulations in the reconstruction market could in 2 to 3 years lead to skyrocketing home prices in Gangnam. They might as well call on the government to leave everything to the market. What is worrisome is that the diffusion of that kind of view could cut away at the effects of housing policy and lead to a ideological dispute.
The Hankyoreh, 30 April 2005.
[Translations by Seoul Selection (PMS)]
[Editorial] Housing and Speculation |
