[Editorial] Real Estate Policy Strong as the Constitution?

The bill that follows up on the August 31 Real Estate Measures has been watered down in a big way now that it is at the National Assembly, because the government and ruling party have relaxed much about the policy ahead of full Assembly committee review. The main opposition party wants to rewrite the whole thing. What you see is a repeat of the same process where reform legislation peters out or gets stripped of its essential elements upon arriving at the Assembly.

The biggest problem is the attitude of the government and ruling party, which continues to lack consistency. Recently they significantly reduced the "basic facility" tax rate for "reconstructed" apartments and narrowed the range of apartment projects to which that applies in the first place. The Minister of Finance and Economy just announced that the government is going to postpone the timeframe for when it hoped to reach a one percent effective rate on property taxes. If that is what happens to a policy that was supposed to be as strong as the constitution, who will ever believe that the government is really determined to stabilize the cost of housing and eradicate speculative investment? Hopes that the policy would be largely incapacitated have already led to a return of pre-August 31 prices for Gangnam's reconstructed apartments. Not that policy factors explain everything about market changes. But when it comes to the issue of real estate it is widely recognized that consistency is key to determining whether policy is going to succeed or fail.

The main opposition Grand National Party (GNP) is openly arguing its position using the "arguments of the rich" as it tries to render the policy ineffective. At first it opposed the key part about expanding the range of those who would have to pay comprehensive real estate tax, and now it is openly suggesting that tax could be unconstitutional. Meanwhile it wants to lower the transfer tax for persons with two homes to 33 percent instead of the current 50 percent and exempt more people from having to pay the comprehensive tax at all. If it gets its way, all the August 31 Real Estate Measures will be left in little more than name.

There will be more latent potential for speculative investment once the trillions in compensation for those being displaced by state projects such as the "administrative city" and "innovation city" starts flowing. Weak policies meant to fight speculative investment only build up the market's immunity to others that follow. Real estate policies will never have any effect in the future if the policy announced August 31, already inadequate as it was to begin with, gets further watered down.

The Hankyoreh, 28 November 2005.

[Translations by Seoul Selection]