The government has decided to put purchasing rights for Pan'gyo "New Town" apartments on sale in November and prohibit the reconstruction of high-rise apartments in Seoul's Gangnam neighborhood. Those are urgent measures meant to get a hold of the sharp rise in housing prices in certain areas, and it does look like they will be helpful. In order to stabilize prices over the long run they need to be backed up with sustained speculative investment suppression policies such as stronger property taxes and better taxation of profits from speculative real estate investment.
Changing the government's schedule and deciding to put Pan'gyo apartments on the market in November was a relatively drastic decision made after much agonizing, but it is a positive move for the cause of price stabilization. It is not without problems such as a lack of consistency of policy and confusion for people on the applicant waiting list, but side effects of that degree are going to have to be endured if speculative investment is going to be kept under control. Now that the issue is solved, however. All it has done is postpone the point when the application craze gets overheated. The government should use the time it has earned to commence on a thorough crackdown designed to block speculation.
The decision not to permit reconstruction of high-rise apartments is necessary to subdue the overheated reconstruction drive. The recent signs of rising housing prices started with rebuilt apartments in Gangnam, so the restrictions are unavoidable. Given that there are accusations in the National Assembly that the attempt to claim profits from redevelopment are constitutional, it is quite obvious that the skyrocketing prices would spread were the government to permit reconstruction of high-rise apartments in the area.
It will nevertheless be too much to expect these measures to make housing prices stable over the long term. There is still demand for speculative earnings through profit margins from housing sales, and that is because the law on purchasing rights and real estate makes that possible.
It is therefore necessary that along with these one-time measures there be systematic stabilization schemes such as increased taxes for the owners of multiple homes and means to claim speculative profit. It will be critical that the government have the political will to pursue such policies without wavering. Ample supply is the fundamental solution as far as stable prices are concerned, but without long-term policies in place housing will be used by speculative investors as means to increase wealth no matter how much housing is made available.
The Hankyoreh, 18 February 2005.
[Translations by Seoul Selection (PMS)]
[Editorial] Long-Term Policies Needed to Stabilize Housing Prices |
