The government is again getting ready to go after housing prices, and it looks like it will announce new measures as early as this week. There must be thorough review of existing measures. It was right to focus on fighting excessive real estate possession and speculative investment with better real estate tax and more realistic tax assessment standards, but the goal was wrong. Not all can be blamed on speculative investors. There is nothing the government can say in response if it is criticized for not having considered that.
Market measures have the desired effect when there is balanced management of supply and demand. Measures so far have overemphasized the management of demand, and as a result there were only limited effects. It also caused a consuming debate about whether demand should be suppressed or there should be more supply. It is not a choice of either or. This time there must be comprehensive measures that take both into consideration. Finding more places to build is important, but changes need to be made if among the existing measures there were things that ended up holding back supply unnecessarily. The claim that the requirement that a set proportion of small-sized units must be built in reconstruction projects should be amended so that there are more mid and large-sized units should not be entirely ignored, because it might not fit with the higher official income standard and market trends. That should be accompanied by supplementary measures like claims on development profit and making up the difference in reduced small-sized unit construction by supplying more rental apartments.
As for demand, something desperately needs to be done about the loose money on the market. If interest rates cannot be raised, the money that moves around in the form of speculative investment must be blocked. They say that there is discussion of further lowering the ratio of money borrowed to a home's fair value in areas where housing prices are skyrocketing, but that should be taken a step further. It would be worth examining a policy that looks into whether when persons owning multiple homes purchase additional ones their principal and interest repayment burden is appropriate given their income, and then restricting loans even when they have collateral. Similar standards are applied in corporate loans. The policy should be decided carefully, however, so that people who actually purchase homes are not kept from getting loans. Something else that must be given thought is a plan to set straight the real estate tax, which has taken further steps backwards because it was relaxed in the course of discussion at the National Assembly and because of resistance from local governments. Things might not have come to what they are currently had the real estate tax structure been properly in place.
The Hankyoreh, 15 June 2005.
[Translations by Seoul Selection (PMS)]
[Editorial] Policy Must Consider Housing Supply and Demand |
