Back To Top

[Kim Myong-sik] Socialist approach fails in real estate market

After numerous failures, policymakers of the Moon Jae-in government must by now know that they cannot control apartment prices with tough restrictive measures on property transactions. With their latest package, they just seem to be trying to impress the voters who could help them stay in power.

Days of the Moon administration have passed really fast with the last half year spent in the fight against the invisible coronavirus. The rest of its five-year tenure is going to be a difficult time working to restore the national economy devastated by the pandemic, plus the worst flood damage in decades. Then there is the work to stabilize apartment prices which President Moon called the number one “people-saving task.”

Civilian experts and the authorities of the Ministry of Land, Infrastructure and Transport are quarrelling over the overall rate of price increases, but the focus of the issue is that most apartments in the covetous Gangnam area of Seoul have added several hundred million won in their offered prices since the inauguration of the Moon presidency.

Minister Kim Hyun-mi and her staff have announced as many as 22 new apartment policy packages, including plans to develop new clusters in Seoul suburbs in order to increase supply. Yet the market stayed heated because the project volumes were not big enough to absorb demands. This month, the ruling party-controlled National Assembly mass produced statutes raising tax rates and interfering with the “jeonse” lease system.

The April 15 general election produced a monster governing party with 176 out of the total 300 Assembly seats, a great blessing for those who believe that anything can be done with the power of numbers, even if it could threaten the constitutional right to personal property. Bills were passed by standing committees and then by the plenary session in a single day, and the president proclaimed the new laws the next day in a record speed of legislation,

The ruling group’s fundamental approach is to divide the population into the haves and have-nots, apartment owners and tenants, and justice lies in benefitting the weaker side. They just forget that in our free society the two positions are always interchangeable.

When I started married life in the late 1960s, I shared an apartment in Yongsan, Seoul, with a friend of mine who owned it. After moving to a few other places on jeonse – no monthly rental but a substantial amount of deposit, from which the owner can take the interest – I found myself the owner of an apartment in Gangnam. I lived there for more than 30 years until coming to Gimpo five years ago.

While a resident of Gaepo-dong in Gangnam District, I found the government authorities and the general citizens for that matter were overly obsessed with doing something about the rising prices of Gangnam apartments. Special observation zones were designated over the area to watch transactions and increase taxes, but such measures rather pushed owners to hike prices to cover higher expenses.

Any new administration and the minister in charge vainly try to leave behind visible records of putting apartment prices under control, especially with those in the Gangnam, Seocho and Songpa districts which comprise the pricey zone of Gangnam, south of the Han River. But, they need not to have such jitters during their limited tenures as times have proven that government policies cannot defy the rules and force of the market.

A half of the nation’s total population of 51 million live in the metropolitan area consisting of Seoul, Incheon and the surrounding Gyeonggi Province which account for only 11 percent of the country’s total territory of 100,200 square kilometers. People keep coming to Seoul; even older people with life savings choose to live there where better medical facilities and amenities are available. Gangnam will continue to attract people until its merits lag behind the high cost.

The universal call for protection of private information does not apply to politicians and high-ranking officials. The annual personal property reporting required for National Assembly members and senior officials revealed the names of those “sinners” who own apartments and other properties in plural numbers. Whoever owns an apartment in Gangnam is considered a real estate speculator.

Open pressures are applied to them from the Blue House to give up redundant properties. People who refuse to comply or are delaying a decision face mass condemnation. Kim Won-jo, senior presidential secretary for civil affairs, took much blame for preserving his apartment in Gangnam at the cost of his Blue House job. His resignation eventually led to a reshuffle of the presidential staff this week.

The administration and the ruling Democratic Party’s well-coordinated operation to arrest apartment price hikes, however, has yet to earn good scores from the public. President Moon’s approval rate has gone down to below the 50 percent mark following the legislation of statues on apartment leasing and property taxation. In anti-government demonstrations, angry protesters threw their shoes into the air and shouted: “Do not rule the country as if you own it!”

The apparent hysteria about Seoul’s apartment price rise has brought the ruling group to yet another act of arbitrariness. Democratic Party leaders expressed wishes to move the capital city to the Sejong administrative town some 150 kilometers south of Seoul in expectation of some effect on property prices in the metropolis.

They bore the idea in a brazen disregard of the 2004 Constitutional Court ruling that Seoul is the capital city of the Republic of Korea under its unwritten constitution. Again, the audacity from controlling more than a comfortable majority in the legislature is displayed in their argument that special laws may be written to override even the highest court decision.

Every sign at the moment indicates that the leftist government will take an ideologically-correct course in its war against the Seoul apartments market. Priority shall be given to having property owners surrender all their income from price hikes in taxes of various titles. And benefits in diverse forms shall be devised for the tenants in jeonse or wolse (monthly rental system) to the disadvantage of the owners.

Law forces apartment owners to accept lease extensions by two more years with no more than 5 percent rise of deposit. President Moon suggests that properties surveillance teams will be operated to prosecute apartment owners who cheat tenants to raise deposits, making us wonder where this republic is heading. Realtors will have to install CCTVs in the near future.

Kim Myong-sik
Kim Myong-sik is a former editorial writer for The Korea Herald. -- Ed.
catch table
Korea Herald daum