ed Reviving housing market

Government must not forget lessons of property bubble

The Korean economy is expected to grow 2.3 percent in 2013, the lowest in years with few signs of an early pickup. An average of 55,488 homes changed hands each month in 2012, the slowest since 2006. Give the two sets of economic figures to any policymaker, and they will likely suggest the same solution: perk up the dormant housing market.

That’s what President Park Geun-hye’s economic team did Monday. And they did so with clear determination. The government’s policy package to bolster the sagging property market includes almost all steps available ― bold tax breaks, relaxed lending rules and loosened building regulations.

For instance, the government will exempt capital gains tax for buyers of new or long-unsold homes priced 900 million won ($820,000) or lower, for five years. Also, people who buy homes for the first time can borrow far more money than before if their homes are worth less than 600 million won and their combined family incomes do not exceed 60 million won a year. Old, low-rise apartments will be rebuilt into high-rise flats.

Some benefits, including capital gains tax exemption, are unprecedented because the government here previously shied away from such drastic measures even during the 1997-98 currency crisis.

It’s up to watchers to see if the present economic slump is more severe than the Asian financial crisis. Yet it’s true that the domestic property market of today needs some structural remedies. Especially serious is the massive rise in the “house-poor” classes ― the Korean version of “underwater” homeowners whose annual income is barely sufficient to pay the principals and interest on mortgage loans ― and “rent poor” ― people who can seldom make ends meet because of soaring rents.

So the government is right to encourage people without their homes to buy instead of living in rented accommodation by exempting them from purchase taxes and easing the strict mortgaging ratios. It also deserves some praises for the positive loan modification program for impoverished homeowners and turning the soaring amounts required for key money into soft-term loans for hard-pressed tenants.

These are justifiable measures because the working families are victims of the previous governments’ irresponsible policy that encouraged people to buy homes with bank loans.

Yet we are strongly opposed to the industry’s calls for additional easing of lending rules because this would end up replacing the old house poor with a new one. It will also be a reckless repetition of past mistakes if the government succumbs to the speculative forces’ demand for lifting price caps on newly-built apartments. The nation’s economy, like a drug addict, has fallen back to the property market as an easy means of bolstering the broader economy. This should no longer continue.

Domestic home prices are still too high for the bottom 40 percent of the population on the income ladder. It is regrettable in this regard that the latest package completely ignored steps to provide more affordable housing for the most vulnerable people.

In Korea, a country with a small amount of land and large population unlike America, homes should be for living in, rather than for owning let alone speculating on. Not just the government but the public seem to be forgetting this ― once again.