Wrong Preion

Government Must Give Up Plan to Buy Unsold Apartments

More and more construction companies in provincial areas face bankruptcy, partly affected by a housing market slump. Seventy-one small and medium contractors around the country went under this year. Their business failures apparently stemmed from financial hardship amid a sharp increase in unsold apartments and homes in small towns and rural areas.

A total of 90,822 newly-constructed apartments and homes are left unsold as of July 31, up 30 percent from a year before. More than 90 percent of them are located in provincial areas. This indicated that many contractors had rushed to build apartments to make profits from the overheated property market. However, they have to undergo difficult times because the market began to cool off, hit by a series of government anti-speculation packages including heavier property and capital gains taxes.

Provincial construction firms call for state support to prevent more bankruptcies of their financially troubled contractors. Market analysts also say the government needs to take measures to help struggling companies improve their cash flow. As economic activities in many provincial areas are heavily dependent on the construction business, appropriate steps are required to avoid the serious economic consequences from further bankruptcies.

Against this backdrop, the Ministry of Construction and Transportation on Thursday decided to purchase 5,000 unsold apartments in provincial regions as part of measures to help troubled contractors keep afloat. The ministry plans to rent the apartments to the low-income bracket. It also decided to encourage the private sector to buy 20,000 unsold apartments. It promised to provide tax incentives to privately-run real estate investment trust funds or mutual funds if they buy unsold housing units and offer them for rent.

Despite the good intentions of the plan, the government is now under severe criticism for appropriating taxpayer money to rescue moribund private businesses. Critics are attacking the government for moral degradation. They pointed out that the government cannot and should not inject taxpayer money into the ailing construction sector.

Many market players have slammed the government for implementing too rigid a policy and imposing strict regulations in a move to crack down on property speculation. The government is partly responsible for the sluggish housing market in provincial areas because it failed to take proper action to tackle speculation without causing a drastic slump in the construction sector.

The government plan to purchase unsold apartments is a ``poison'' prescription. The government has no mandated power to provide undue compensation to construction businesses for their reckless projects of building apartments and homes without making any proper study of the market prospects. Thus, the government should scrap the plan to avoid any further policy failures regarding the construction and property market.