Some Claim Government Is Encouraging Real-Estate Speculation

It was confirmed on June 23 that public institutions including the government will pay the private sector as much as 23 trillion won to expropriate land for new city development next year.

The figure has tripled since 2003, the year the Roh Moo-Hyun administration was launched, and is similar to the next year’s military budget (22.9 trillion won).

The Ministry of Construction and Transportation (MOCT) submitted an internal report that integrated the expropriation money spent by the Korean National Housing Corporation, the Korea Land Corporation, and local governments, including the Seoul metropolitan government and the Gyeonggi provincial government, to the real-estate policy team of the Uri Party. According to the report, 18.1 trillion won and 23 trillion won are scheduled to be spent this year and next year, respectively.

In 2003, 8.3 trillion won was spent and 14.4 trillion won was spent for expropriation in 2004, which indicates that a whopping 63 trillion won was paid in the four years of the incumbent government.

If the projects to build innovation cities and business cities, which are currently under discussion, are confirmed, the figure is likely to increase.

Among the total expropriation money, 3.1 trillion won (2003) and 8.2 trillion won (2004) was spent in establishing building sites. An additional 11.2 trillion won and 15.3 trillion won will be spent in 2005 and 2006, respectively.

As there is a strong tendency of residents who were subjected to expropriation purchasing of nearby land or residential buildings with the compensation money in order to exploit tax benefits, some criticize the government plans as inflating nearby land prices and encouraging speculation.

Ahn Byong-yub, Uri Party’s real-estate policy planning team chief, said, “The ruling party and the government agreed that the expropriation money might serve as an obstacle to stabilizing the real estate market, and are now looking for ways to solve the problem.”

The government and the ruling party are now contemplating giving bonds in compensation for the expropriation of land worth more than 30 million won, and offering readjusted lands as the government did when developing Gangnam in Seoul in the 1970s.

In-Jik Cho cij1999@donga.com