On Sunday the Bank of Korea (BOK) issued a report in which it analyzes the "influence of the August 31 Real Estate Measures on the Korean economy." Various interests in society are interpreting the measures to their own liking and the evaluations of them are all over the radar. The BOK report seeks to assess the economic effects. Being a report from the body responsible for monetary policy, its contents should be of help in reducing the consuming debate about the government's policy on real estate.
According to the report, higher property and transfer taxes will affect "reconstruction" apartments in Seoul's Gangnam neighborhood in a way that causes the cost of housing to fall by a relatively large degree. Overall, however, the decline will no be all that great, and the report says that the fall would only happen next year, when the policy gets implemented. Thus, the report shows you that there is basis to the disappointment felt by those who wanted to see the cost of housing fall on a larger scale as a result of the government measures.
Central to the report is where it outlines how in BOK's analysis the economy will not suffer some great blow even if housing prices go down. Housing costs will fall 10 percent in Gangnam by the end of next year and they'll drop 3 percent nationally, but the resulting decline in GNP growth will only be 0.1 percent. In other words, the assertion that the government's real estate policy is going to intensify the economic stagnation has little basis. The report also comments on how three years from now the measures will actually push economic growth higher.
It also gives you the impression that the government's policy is insufficient instead of excessive. It causes concern to see efforts by some to reverse the government's policy on more forceful property and transfer taxes by exaggerating the negative side effects. Such efforts must be condemned. Those who are disappointed by the measures should be watchful about whether their excessively negative views about them are giving speculative real estate investors reason for courage. What is important first and foremost is that the legislation be finalized. A lot of work still has to be done before there are fundamental changes in the way our society thinks about real estate.
The Hankyoreh, 5 September 2005.
[Translations by Seoul Selection (PMS)]
[Editorial] 'Real Estate Policy Won't Hurt Economy' |
