[Editorial] Is the Apartment Price Stability Measure Effective?

The government plans to carry out a tax probe and expand the supply of apartments in order to cool down the rapid surge of the apartment prices begun in the Kangnam area are only a speed-before-quality policy and a temporary measure. The hike in apartment prices is a chronic problem that the government has pretended to be unaware for the sake of economic recovery. All of a sudden, however, the government hastily took unverified measures. It is very doubtful whether such measures could calm down the surging apartment prices. In fact, it is a worry that the government measures will aggravate the situation.

The apartment price hikes was caused by the rush of money put in to hunt for better investments rather than a low interest profit, which increased with people`s preference for the Kangnam school district. Recently, the heated real-estate investment surge has spread out to the new apartments in construction like the Northern Seoul area and the Metropolitan Capital city area.

Such situation is the natural outcome of the government`s actions. The current economic team of the government introduced the measures to overcome the long-term recession including the permission to transfer the parceling right for the apartment and the reduction of the transfer income tax. However, the measures that ignore the market principle end up with hiking of real estate prices.

The government acknowledged the serious situation too late and proposed the time-worn menu of tax probes and expansion of apartment supply, which are far from being the fundamental reasons for the current situation such as low interest, increased investment for the reconstruction of apartments, and the people`s preference for the Kangnam school district. A tax probe that violates market principles cannot permanently prvent speculative investment in real estate. The rise of the reconstruction apartment prices may recur this time after the National Tax Service`s announcement of the plan to impose transfer income tax last month.

The phenomenon of population gravitating toward the Metropolitan Capital city area will be accelerated by supplying 2.6 million pyong of residential construction area, which is freed from the Green Belt, to build 100,000 apartments in 11 areas such as Hanam, Sungnam, Euiwang, Gunpo, and Euijeongbu. And the belated measures only destabilize wages and construction material prices which are already rising up.

The government must try to cool down the speculative investment drive and to prevent the apartment price hike by controlling the currency circulation rushing into the apartments through an appropriate interest policy and the development of attractive financial products rather than pursuing shock therapies.

The statement made by Jin Nyum, Minister of Finance and Economy, that the Ministry "will discuss with the Ministry of Education about how to improve the educational system such as the equalized school district system." was a very careless one. The change of the school district system will shake the root of the autonomy of the educational system. The change of the educational system to prevent the apartment price hike is simply a fantastical idea. A more prudent approach is necessary for the close evaluation of the favors of the Kangnam school district.