The "August 31 Real Estate Measures" are more comprehensive than any measures taken previously. They include means to suppress demand for speculative investment and plans for increasing housing supply, and approach housing and land as interrelated. Furthermore, the government's political will appears to be strong. The policy even includes the finance sector, since there are new regulations on secured loans against apartments. This is a positive development, though the measures are not without shortcomings since they essentially exclude elements of the "public concept" of land and focus mainly on taxation and supply. They carry no small degree of significance in that they go beyond just fighting speculative real estate investment and could be what corrects Korea's backward real estate tax system and transaction practices. Stronger real estate taxes and transparent transaction practices have long been on the agenda.
Now the discussion moves to the National Assembly, which needs to see this as the last opportunity to set the real estate market straight and depart from the partisan strategizing and stand on the side of the economy and the people's welfare. It will be hard to guarantee the country's future if this time again the plans fizzle out and end up only making the market more immune to improvement. China and other developing nations are growing fast; how much longer is Korea going to be held back by real estate? Not only is it going to be hard for investment to stay alive with the country's current high-cost real estate structure, it will clearly also lead to a loss of growth potential because of the resulting acceleration of the phenomenon of "rich get rich, poor get poorer."
It is fortunate that the ruling and opposition camps are in agreement on the larger framework, but it is of concern that there are considerable differences on the details. The opposition Grand National Party (GNP), for example, wants to lower the effective tax rate goal to 0.5 percent, half of what is called for in the government's proposal. It should rethink that position. Stronger real estate taxes are at the center of the whole policy. The GNP must realize that only 2 percent of all households are going to be subject to a "comprehensive real estate tax" that carries a heavier tax burden. It has long given the impression that it is caught up in defending the established advantages of privileged groups in Korean society. This would be a fine opportunity to rid itself of that image.
Like the saying that a "tangerine becomes a trifoliate orange once it crosses the Huai He," government measures tend to get watered down by the time they arrive at the National Assembly. That is the common perception, and one hopes to see it come to an end. Measures with "public concept" elements such as the disclosure of original prices, post-purchase programs, and eventually a system of permits for housing transactions are entirely worthy of discussion given how Korea is forever going to be faced with limits to its supply of housing because of its small land size.
There must be no repeat of what happened in the past, when real estate policy when back and forth in terms of intensity. The government speaks of its firm determination, but it's still hard to be sure. Time and time again we've seen the conservative media invoke the name of the common people and the economy to upset the policy and the market and have that get all bewildered as a result, as soon as the market settles down and there are fewer transactions. The partial negative side effects will have to be fixed, but they must not be used as an excuse to disrupt the foundation of the policy. Deputy prime minister Han Duck Soo says that ideally housing costs should be what they were before the "October 29 Real Estate Measures" of 2003, but the government needs to be ready to have prices fall even farther.
The Hankyoreh, 1 September 2005.
[Translations by Seoul Selection (PMS)]
Nat'l Assembly's Turn on Real Estate Policy |
