The ruling Democratic Party of Korea is seeking to authorize the Ministry of Land, Infrastructure and Transport to track people’s financial accounts in connection with their real estate transactions.
Rep. Huh Young said last week he will propose an amendment to the real estate transaction report law to grant such authority to the ministry. Currently, the prosecution, the police, and the National Tax Service can access people’s financial information after obtaining court warrants.
The Land Ministry runs a team to monitor the real estate market and crack down on speculation and regulation violations. If the law is revised, the ministry will likely give the authority to that team.
Under the current law, the ministry can access data on real estate registration, related family relations and tax payments. If the law is amended, the ministry will be able to look into financial information such as bank accounts, insurance policies, pension status, and credit ratings. An individual’s financial assets and financial transaction details are important private information that needs to be protected. That is why financial institutions are banned from providing information on their clients without either their consent or a warrant.
President Moon Jae-in instructed his administration on Aug. 10 to consider launching an agency to “supervise” the real estate market.
He seems to mean an organization overseeing house sale and leases among ordinary people. If problems are found, the new agency will refer related cases to the police, the prosecution and the tax authorities for criminal and tax investigations. The plan indicates that Cheong Wa Dae will not leave real estate problems up to the market.
Rep. Jin Sung-joon of the ruling party called for the creation of a real estate market supervisory body much larger than the Financial Supervisory Service.
Now, the party is taking a step further to empower the ministry and later the new agency to look into even the financial information of home buyers. The ministry team is expected to be spun off into the new agency if it is created. The agency looks like Big Brother in the real estate market.
Earlier, the government allowed tenants to access information on the residence of landlords to check if they actually live in their houses after refusing to renew leases in order for them to move in. If homeowners refuse to renew leases to reside in their houses but they did not move in, tenants can lodge a damage suit. This is part of recently unveiled measures to protect tenants. People probably do not want to live in a society where the government watches people, while tenants watch landlords.
To peep into housing transactions as if viewing them under a microscope is almost unprecedented in the world. Many countries have an agency to supervise financial institutions, but they hardly have one to supervise housing transactions. This conception disregards the basis of liberal democracy that respects individual liberty and privacy protection.
Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki said in the National Assembly last week that the government needs to be careful in creating a new supervisory agency. Considering concerns about such organ, Hong’s view is reasonable.
Surging housing prices were not caused by failure to supervise transactions, but by failure to follow the market mechanisms. The ruling party and the government have targeted owners of multiple houses as speculators and tried to punish them with regulations and taxes. Now they seem to be unsatisfied with punitive taxes and tighter regulations. They appear intent on watching people’s every move.
A system to police housing transactions may freeze the real estate market temporarily. In the end, however, pent-up pressure to raise prices may explode all at once.
The administration caused a housing transaction cliff with anti-market quick fixes taken one after another. It cannot curb housing prices by supervising transactions without solving structural problems of supply and demand. If the government keeps going this way, the supervisory agency will become a redundant, tax-wasting organ that only makes people uncomfortable. It must reconsider the plan to create the new organ.