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| Apartment complexes are seen behind a visitor to N Seoul Tower on Jan. 7. Yonhap |
By Lee Min-hyung
Easing looming social unrest over the ongoing asset market bubble should stand at the center of the government's financial policy drive in 2021, as public worries over the overheating market will keep pushing up most asset prices here.
With the spread of the COVID-19 pandemic last year, the government and financial authorities introduced toughened sets of regulations to curb household sentiment for investment.
One key measure was to force banks to cut down the credit line for most households. The step was aimed at temporarily stopping personal capital from flowing into the stock and real estate markets, and thereby helping relieve the market frenzy.
But this only ended up hiking prices further to a record high level. The benchmark KOSPI rewrote history by closing at a new high of 3,152.18 points on Friday. Most housing prices have already surged to such a worrying level that a growing number of young people here are giving up on marriage amid frustration over a greater sense of deprivation.
Of much more concern is that authorities are showing little sign of making drastic changes in their financial policy drive. Market pundits argue delivering a message of warning to the market does not stabilize that market at all.
"Introducing more regulations will keep destabilizing the market and raise apartment prices in Seoul and its surrounding cities," Kwon Dae-jung, real estate professor at Myongji University, said. "Even if the government is taking steps to increase housing supply, it will take some time. The real estate market has frozen due to tight regulations without which the market could stabilize soon."
Despite the unprecedentedly tight regulations, Finance Minister Hong Nam-ki remained optimistic Sunday, saying that the government's tax benefits and housing supply measure will stabilize the market.
But the public widely believes that housing prices will continue to rise this year, with consumers' real estate sentiment index hitting a record high in December, according to data from the Bank of Korea.
The fear sentiment reached its peak among non-homeowners, some of whom continuously inject capital into the stock market, as most of them have de facto given up on purchasing apartments in major cities due to the regulations-induced price bubble.
It appears to be desirable for the government to refrain from creating a climate of fear in the market this year by issuing new regulations, and instead, focus more on achieving a faster economic recovery and signaling its willingness to do this.
