The basic direction of policy regarding housing supply in the Pan’gyo “New Town,” all part of the government’s real estate measures set to be announced at the end of the month, has been decided. The government and ruling party have decided to apply a “prime cost linkage system” to apartment complexes built on public lands regardless of the size of each unit, and regarding middle to large sized apartments more than 25.7 pyeong in size they want to apply a “bond bid system” and claim the marginal profits. That looks like a very realistic alternative, one that will have the effect of holding back speculative investment and have less of the negative side effects.
The “prime cost linkage system” for purchasing prices will contribute to the stabilization of housing prices because units will be sold at lower than the local trend. There is one problem, however, in that people out to make profit from market changes could ignite competition over subscriptions. Therefore it would be a good thing if a considerable bit of the gains made from market trends are reclaimed and reinvested in housing for common people. Adopting a “bond bid system” for mid to large sized apartments will have that effect.
The government has not decided how much would be claimed. When a similar “bond bid system” was used in the past the cap was 70 percent. There would appear to be little need to make the percentage excessively high since the general assessment is that there is already a big bubble in housing prices in the area. It is also good that they want to prohibit regular sales for 10 years on apartments under 25.7 pyeong in size, units that will see big marginal profits because the “prime cost linkage system” gets applied. That will be sure to block demand for short-term speculative investment.
Supplying housing at less than local prices through “public development” (gongyong gaebal) has to be done persistently and thoroughly if it is going to have the effect of stabilizing prices. Therefore, the “public development” method of supplying new housing needs to be put to the greatest use possible, even if it means amending the relevant legislation. Of course what is more key to the soon-to-be-announced comprehensive real estate policy is making it hard to own multiple homes for the purpose of speculative real estate investment. It is time to increase property taxes and set a schedule for elevating taxes to the standards of advanced nations.
The Hankyoreh, 5 August 2005.
[Translations by Seoul Selection (PMS)]
[Editorial] Pangyo Real Estate Policy is Good News |
