[Editorial] Government Land Price Assessment May Hurt First Time Buyers

The Official Prices of Standard Lands (OPSL), which the government announces each year after assessing land prices of 500,000 sites nationwide based on the prices of January 1, soared by 20 percent compared to those of last year. This is the highest inflation rate since 1990. The result indicates that the government’s measures in 2003 against land speculation failed in curbing land price inflation despite its ideal promises.

The government’s announcements, such as building a new administrative capital and developing new towns, are chiefly responsible for the record-high escalation of the OPSL as they are the ones that lured speculation. For instance, the land prices of South Chungcheong Province, which is often referred to as the most likely province to host the nation’s new administrative capital, soared by 28 percent, the highest increase in the country.

In spite of the failure, the central and local governments are continually making promises that they will ease various regulations on land development and develop new towns, making further inflation of land prices inevitable.

If land prices rise, house prices rise as well, making it even more difficult for middle-class people to purchase their own house. If more money is poured into land speculation, sound production activities will dwindle and economic recovery will be slower. The central or local governments should not make promises that would eventually bring serious side effects and harm the nation. Thus, the governments should review whether relocating the administrative capital would be worthwhile and practical and how seriously will it effect land speculation.

Moreover, the escalation of land prices is expected to increase tax burdens on first-time house buyers. It is because various taxes related to real estate will go up if the OPSL rise. The tax burdens of first time home buyers have already risen extensively. Thus, the government should soon draw up measures to reduce real estate related taxes for first time buyers or buyers who purchase real estate for an actual need rather than for speculation. In addition, the government should also reduce taxes like acquisition and registration taxes on real estate that it has already promised.