Experts Warn Against Real Estate Focus

Economists have come out to sound an alarm about the government’s economic policy of focusing only on anti-speculation real estate measures.

Driving all the capabilities into one direction might bring about negative side effects in other areas.

Some point out that the breakdown of the public trust in government policies is more serious than the “bubble burst.”

Dong-A Ilbo conducted an interview on May 24 with economic experts. On the current real estate policy, which can be symbolized as “bubble seven,” they said that the policy’s flaws are a unilateral pursuit of policies in an effort to produce noticeable results, lack of countermeasures against real estate bubble bursts, and imbalance with other policies.

In particular, amid concerns of a slowdown of the Korean and global economies, the government seems not to be considering the consequences of the real estate bubble burst and is merely pushing for the policies. This may produce serious problems as evidenced when it encouraged credit card use, which led to the bursting of consumption.

While it is obsessed with real estate measures, it failed to press ahead with measures with higher priority such as the low fertility rate, aging population, job creation, and mid-and-long-term tax reform.

Hyun Jin-kwon (taxation policy) of Ajou University said, “A government with a sensible economic policy direction should not threaten the real estate market. It is worrisome that the government views the real estate issue as class discord when it should solve it with economic principles.”

Many said that the government should encourage a soft landing of the real estate market rather than just warning about a “bubble burst.”

Ahn Jae-wook (economics) of Kyunghee University pointed out, “If the government is sure about the bubble, it should come up with measure to make the market land softly. Talking about impending bubble bursts without any action will only worsen the consequences.”

The policy of imposing taxes while blocking trades in the real estate market needs complimentary measures.

Lee Sung-geun (real estate studies) of Kyunghee University said, “Only with sales can the market be formed and the prices drop. The government needs to suspend capital gains tax to boost transactions.”

Kim Kyung-hwan (economics) of Sogang University stated, “The current tax scheme drives households with one house into a corner, which should be improved.”

The fundamental problem is that real estate measures alone cannot stabilize housing prices.

Kim Gwang-woong of the Graduate School of Public Administration at Seoul National University said, “In this complex system, we should solve problems with a policy mix and should pay attention to the public opinion. But the current administration is pushing for policies as if they have all the answers.”

Even those who regard the government’s real estate measure as inevitable were concerned about its ramifications.

Oh Moon-seok, chief of the Economic Research Center at LG Economic Research Institute said, “To stabilize the real estate market, the government’s intervention is necessary, but it may become a stumbling block in economic growth if global economic environments worsen.”

Hyun-Jin Park Sun-Woo Kim witness@donga.com sublime@donga.com