Can Government Curb Real Estate Speculation?

Brand-new realtors can be found anywhere at Yangchon-myun in Kimpo, Gyeonggi Province, recently designated as a new town. However, half of the 30 realtors were closed apparently due to the rumor of crackdown by the National Tax Service (NTS) on May 23.

When the reporter pretended to be someone who was looking for real estate for sale, a realtor said, “Those who closed their office are still doing their job through phones.” He added, “They just left the offices because they didn`t want to meet the NTS officials.”

“This is not the first time and speculators don`t even care if the NTS investigate or not,” he said. He also tipped the reporter that they knew the NTS official came to the city and what and where they were doing.

“The NTS officials` presence here proves that this area is a good place to invest money,” said another broker. “A lot of people are calling to buy land even after the NTS announced to crack down on speculation,” he explained.

At the news that NTS investigation team arrived, 20 out of 50 realtors in Daechi-dong, Gangnam, Seoul, closed their offices on May 24.

Around 11 a.m., NTS Investigators went in to a realtor office at Samsung-dong in Gangnam, Seoul. They started to investigate all the documents of books and contracts of trades and lists of apartments. The maintenance of the broker`s office costs 4 million won a month including the wages of two workers and rent. The NTS decided to probe into the realtor because the amount of its income tax return was only 7 million won last year.

Despite the close investigation into the office, they only found some of the contacts of trades over the year and the contracts of rent.

“There are so many apartments in this trade books. But how come there aren`t as many trade contracts?” asked the investigators. “The apartments for sale and trades in other realtors are included in the trade books together. We don`t have many trades, so we are in the red each month,” replied the realtor.

However, the investigation team compared the trade books with the contracts for two more hours and found out that the realtor had left out a number of trades or reduced the amount of them.

Meanwhile, Lee Doo-won, an economics professor at Yonsei University, said that without providing a place to put investors’ money in with the currently low interest rate, cramping down on the real estate speculation costs a huge amount of money with a little effect. “The government should curb the real estate speculation by encouraging investor to put their money in other productive markets.”

Hyo-Lim Son aryssong@donga.com