Kang Gi-jung, senior presidential secretary for political affairs, said Wednesday a “real estate (housing) transaction permission system” must be considered.
“Some people say the government should have the right to permit real estate transactions in areas where real estate prices soar preposterously,” Kang said in a radio interview, “The government must pay attention to arguments for the introduction of a transaction permission system targeting those who use real estate as a tool of speculation.”
Under the system, people cannot sell or buy houses as they please, but must get government permission beforehand.
Though Kang is not in charge of real estate policy and Cheong Wa Dae tried to calm controversies by dismissing the permission system as his personal opinion, the senior official’s remarks are causing concerns about the presidential office’s economic views.
Kim Sang-jo, President Moon Jae-in’s chief policy secretary, pinpointed Gangnam in southeastern Seoul where housing is expensive, as the center of anti-speculation policy in an interview with another radio station on the same day. “Honestly speaking, our primary goal is to stabilize (housing) prices in Gangnam”
Their comments came a day after Moon vowed in his New Year’s news conference to strengthen real estate measures ceaselessly when existing steps are not deemed effective in curbing housing prices any more.
The concept of the government deciding who can sell or buy houses and who cannot is rarely implemented even in most socialist countries. It is an obvious anti-market policy hardly imaginable in a free market economy.
Korea is a liberal democracy and a free market economy. The permission system restricts the freedom of residential mobility and private ownership. It shakes the foundation of the country and violates its Constitution. It is surprising and lamenting to hear a senior Cheong Wa Dae official utter words that deny the market mechanism completely. The presidential office appears to disregard the Constitution and the people.
It is questionable if Kang examined the web of questions carefully before mentioning the system: What are the fair criteria for being expensive? What should people do to get permission if the system is implemented? How can the government discern speculators from investors?
Kim’s specific mention of Gangnam raises suspicions that the area is being used as a political scapegoat for the ruling camp to unite its supporters ahead of the general election.
The ruling camp has effectively portrayed real estate owners particularly of expensive Gangnam apartments as speculators to be detected and punished. It has also tried to look like a guardian of ordinary people living outside Gangnam and make conservatives in the opposition camp look like defenders of Gangnam residents. Gangnam-bashing at this point in time with the general elections just three months away can hardly avoid suspicions about its political motives.
The Moon administration has unveiled measures targeting real estate speculation on as many as 18 occasions after it was inaugurated in May 2017. However, apartment prices in Seoul did not fall, but they rather increased each time the steps were unveiled. Seoul apartment prices rose 40 percent over the past three years.
Nevertheless, the government stubbornly refuses to accept its policy failure. Instead, it blames supposed speculators and pushes harder for a tighter grip on the market. High-flying apartment prices can never be curbed with emotional, ideological and political responses.
What happened after it tried only to suppress the prices of Gangnam apartments, particularly old ones there that should be reconstructed? The prices of apartments in other districts of the capital surged. Those of new ones skyrocketed due to their scarcity value as the administration effectively blocked reconstruction of old apartments in locations where people want to live.
Cheong Wa Dae must review why its policies kept producing opposite effects. Housing prices can be stabilized downward only when supply increases where there is demand. This is the basic market economy principle.
Speculation must be rooted out, but targeting Gangnam residents as speculators and retaliating at them emotionally will only aggravate the problem.
Cheong Wa Dae must not waste time any more fighting the market. It must focus on realistic and rational measures including increasing supply.