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[Opinion] Grand National Party Lacks Creativity

Posted June. 15, 2005 04:26,   


About this time last year, the ruling Uri Party argued with the government over the disclosure of initial apartment prices, which the party promised during the general elections, but agreed not to disclose the prices for the time being. This is not only because it is against the principle of the market economy, but also because there are concerns that if the initial prices of apartments sold by Korea National Housing Corporation are disclosed, rental housing construction could be disrupted.

Civic society frequently calls for the disclosure of initial prices. However, even the policy committee of the Grand National Party (GNP), which has long supported market economy principles, suddenly proposed “disclosing the initial prices of not only public housing, but also apartments of private companies.” Chairman Lee Hye-hoon of the GNP’s Fourth Policy Coordination Committee explained “Unlike other commodities, housing is not bought when finished. Therefore, the consumer must know the initial price in detail.”

If the initial price is disclosed in detail, the sales price could drop. This could lead to a decrease in the constructor’s profits. However, the price of a sold apartment will become similar to existing apartments nearby, and if there is a lack of housing supplies, the prices may skyrocket. Thus, this could lead to a transfer of wealth with more profit than that of the constructor going to those who bought the apartment. If the profit of the construction company increases, at least the apartment supply will increase. However, if the profits increase for the buyer, this will only lead to a rise in speculative unearned income. This will clearly trigger more speculation of those who dream of hitting the jackpot through the supply-demand imbalance.

If the government is not considering an unconstitutional law that limits constructors’ profits by, for example, 10 percent, deregulation rather than initial price disclosure is the shortcut to housing price stabilization. Multiple regulations such as restrictions on reconstructing, land use and floor area ratio not only cause initial price hikes but also are major culprits of sudden price jumps due to a lack of supply. The fact that the GNP is proposing the initial price disclosure as if it is an alternative, even after the government and ruling party failed to implement the measure, seems to show that they are not only “all the same,” but also “even lack creativity.”

Hwang Ho-taek, Editorial Writer, hthwang@donga.com