[Editorial] Policy Uncertainty Makes For Unstable Housing Prices

There is something wrong with the way the price of apartments in Seoul's Gangnam neighborhood hare been rising since the star of the year. They are rising faster, and so people are taking apartments off the market. It is the exact opposite of the expected downturn after the legislation related to the "August 31 Real Estate Measures" past in the National Assembly. It is still too early to tell what the trend is, but it is more than of a little concern to have Gangnam housing prices getting unsettled again.

The biggest problem is the confusion between the national and local governments over real estate policy. The city of Seoul has been relaxing regulations such as the building-to-land ratio for "reconstructed" apartments and restrictions on how many floors apartments can have. It has also come out opposed to the "new town" project in Songpa. Easing restrictions is exactly what the "reconstruction" market wanted to hear, and since it is Seoul that has actual authority over the Songpa "new town" project, the project will be running into problems if Seoul opposes it. We do not want to spend more time criticizing the way Seoul reneged on its pledge to negotiate housing policy with the national government or how the national government has pushed ahead with "new town" construction despite the city's wishes. What needs to be noted here is that the confusion hurts consistency in real estate policy and the people's confidence in that policy.

There are many factors that could potentially contribute to market instability. Sales start on Pan'gyo "new town" apartments in March, and some 20 places in the greater capital region are scheduled for "new town" development. A massive amount of cash is about to be unleashed as compensation for land taken for the "administrative city" and the "innovative cities." The demand for development and uncommitted money on the market any become kindling for real estate speculation at any time.

The national government must not see rising prices in Gangnam as a limited or temporary phenomenon and in doing so fail to take it seriously enough. It produced a series of strong real estate measures last year, but the average price in Gangnam went up more than 30 percent. You can already hear people in Gangnam openly saying that the "market situation is going to change if you just bear it out until current government's term is up." Years of experience demonstrate that the demand for housing for real estate speculation is not dependent exclusively on the regular rules of supply and demand. The national government needs to be principled and give people confidence about stabilizing apartment prices and eradicating speculative investment.

The Hankyoreh, 9 January 2006.

[Translations by Seoul Selection]