The price of regular apartments in Seoul has started to rise again for the first time in 7 months. The margin is still small, and it remains unclear whether it will become the trend. But the fact of the matter is that there is still anxiety over what might happen, at a time when the government is moving to stimulate activity in the real estate market. The government needs to watch those rising prices carefully and be fully prepared to make sure they don't start to skyrocket.
The biggest cause of worries that apartment prices might get out of hand is government policy. When the economic stagnation started to last longer than might have been hoped last year, the government began relaxing real estate regulations in order to revive the real estate market. This year as well, 8 areas, beginning with Seoul's Gwangjin-gu, have been freed of their "speculative real estate investment zone" status, and the government is said to be considering lowering the real estate transfer tax even further. President Roh Moo Hyun once got directly involved in the issue and declared he would place a firm grip on housing prices, but what we're seeing in actuality is a continued series of measures to ease market regulations.
The government says the measures are about breathing life into real estate transactions and not about encouraging speculative investment. That's not how the market responds, however. With the start of the year the government has been going all out in reviving the economy, and it is hoping that the real estate business will pick up for sure. That mood is already being reflected in apartment sales and the calling prices for deposit-based leases. The governments continued relaxation of the regulations is gradually having an effect.
Hundreds of trillion of Won remain in ambush to commence on speculative real estate investment, having been in a holding pattern, waiting for something to invest in. As seen in how KOSDAQ has been soaring since the beginning of the year, once something is rumored to be something you can make a lot of money in there is likely going to be a recurrence of "thoughtless investment." If the same kind of speculative money amasses in the real estate market, the market will overheat instantaneously. Past experience says as much.
Maybe some will wonder what the worry is when apartment prices are only just beginning to squirm around. If the slight developments are missed and left unattended to, however, there will be a bigger price to pay later. We hope the mistakes of the past are not repeated.
The Hankyoreh, 31 January 2005.
[Translations by Seoul Selection (PMS)]
[Editorial] Watch Those Rising Apartment Prices! |
