The Organization for Economic Cooperation and Development (OECD) has recommended South Korea's housing policy should focus more on developing an efficient market than on controlling prices. In its 2007 Economic Survey of Korea, the Paris-based rich nations' club said the government should begin to reduce regulations restricting the supply of housing. It pointed out that greater reliance on the private sector would better match supply with consumer preferences. In short, the report implied that the country can succeed in stabilizing house prices by taking more market-friendly policies and deregulation.
It is necessary for policymakers to sincerely reflect the OECD recommendations in order to work out more fundamental and effective measures against soaring prices of homes and apartments in and around Seoul. We can recognize that OECD researchers have made their own assessment of the local property market that is quite different from that of Korean officials. When the survey draft was made public in March, the Seoul government demanded the researchers change a lot about their critical evaluation of its anti-speculation policies. However, the OECD released its final report without many changes on Wednesday.
Vice Minister of Finance and Economy Kim Seok-dong told reporters the next day that the OECD believes South Korea's real estate policy is the best alternative to what the international body has suggested. His remarks appeared aimed at sidestepping the difference on this issue between the government and the international body. Kim went on to say the administration could phase out real estate-related regulations in case the market regains stability. However, it seemed that Kim and other officials have failed to make OECD economists have a better understanding about the volatile Korean market situation and the seriousness of the rampant speculative mood.
The public and the mass media have well recognized the real problem of real estate speculation, criticizing the government for repeatedly taking only stopgap measures. Of course, owners of speculative-prone regions in Seoul and its metropolitan areas have balked at the policy of imposing heavier property taxes on expensive houses and apartments that are valued at 600 million won ($645,000) or higher. Critics also slammed the government for setting price controls and other market-hostile policies.
Upon the release of the OECD survey, conservative newspapers and broadcasters have wasted no time in lambasting the Roh Moo-hyun administration for failing to take market-friendly policy tools as recommended by the OECD. It is ridiculous that they have harped on the suggestions without giving any critical review to them. The media must read carefully what the group said: ``While the increase in the average nationwide house price in Korea since 2000 is well below the average of other OECD countries and remained moderate in 2005-06, house prices have become a very sensitive political issue …’’ It is apparent that the OECD can not grasp the real picture of property speculation in South Korea.
Policymakers ought to publicize their policy measures more aggressively among the OECD and other international institutions in a bid to avoid any misunderstanding. They also have to push for deregulation and market-oriented policies in the era of globalization.