Radical steps needed to keep supply and demand in balance
The government has just announced measures ― yet again ― to stabilize real estate prices. It designated four more districts in Seoul and two nearby suburban towns as speculative or overheated zones, subject to tighter loan and other regulations.
The anti-speculation steps are the first in more than a year since the government unveiled a similar package, Aug. 2, 2017. The Moon Jae-in administration once seemed to succeed in stabilizing land and housing prices by naming speculative areas, slapping heavy taxes on owners of multiple homes, curbing mortgage lending and restricting the reconstruction of old apartments.
Since this spring, however, property prices have begun to rebound, especially in the capital. Some apartments along the Han River saw their values soar to 100 million won ($90,000) per 3.3 square meters, increasing frustration among non-homeowners.
It is far from sure the latest anti-speculation package will cool the rekindled property boom, not least because the measures are aimed mainly at curbing demand but fall short of expanding supply. Moreover, the economic slump makes it difficult for the Bank of Korea to raise the interest rate, and the overflowing liquidity could heat up the property market further, particularly in the house-moving season of fall.
An excessive rise in property prices can result in simultaneous jumps in leasing and rental rates, putting heavier financial burdens on tenants, particularly the working poor. It can also result in the polarization of assets in addition to income, hurting social harmony. And that shows why the government has to come up with a more fundamental solution.
The Moon administration should positively consider introducing steps to increase home supply. The Ministry of Land, Transport and Infrastructure is right in this regard to move toward supplying better and cheaper homes. That alone, however, will hardly suffice to stabilize property markets.
It should work out more effective and comprehensive measures to expand supply, including incentives to increase homes for sale or rent while upholding market principles.
The government has just announced measures ― yet again ― to stabilize real estate prices. It designated four more districts in Seoul and two nearby suburban towns as speculative or overheated zones, subject to tighter loan and other regulations.
The anti-speculation steps are the first in more than a year since the government unveiled a similar package, Aug. 2, 2017. The Moon Jae-in administration once seemed to succeed in stabilizing land and housing prices by naming speculative areas, slapping heavy taxes on owners of multiple homes, curbing mortgage lending and restricting the reconstruction of old apartments.
Since this spring, however, property prices have begun to rebound, especially in the capital. Some apartments along the Han River saw their values soar to 100 million won ($90,000) per 3.3 square meters, increasing frustration among non-homeowners.
It is far from sure the latest anti-speculation package will cool the rekindled property boom, not least because the measures are aimed mainly at curbing demand but fall short of expanding supply. Moreover, the economic slump makes it difficult for the Bank of Korea to raise the interest rate, and the overflowing liquidity could heat up the property market further, particularly in the house-moving season of fall.
An excessive rise in property prices can result in simultaneous jumps in leasing and rental rates, putting heavier financial burdens on tenants, particularly the working poor. It can also result in the polarization of assets in addition to income, hurting social harmony. And that shows why the government has to come up with a more fundamental solution.
The Moon administration should positively consider introducing steps to increase home supply. The Ministry of Land, Transport and Infrastructure is right in this regard to move toward supplying better and cheaper homes. That alone, however, will hardly suffice to stabilize property markets.
It should work out more effective and comprehensive measures to expand supply, including incentives to increase homes for sale or rent while upholding market principles.
