[Editorial] Housing Deregulation

The government has decided to build two additional new towns in the metropolitan area and expand an existing town, which demonstrates its ineffective anti-speculation real estate policy. With hiked prices of Pangyo New Town and Eunpyeong New Town at the time of selling lots, abundant floating money and the announcement of Pangyo middle-and-large-sized apartment unit winners, demand for housing is stimulated. Accordingly, housing prices are jumping again after having waned because of the government’s anti-speculation measures. At this juncture, redirecting its real estate policy toward expanding supply is inevitable. Yet what is troubling is that the government continues to come up with stopgap measures.

The government should reconsider its ‘tax bomb’ policy that failed to curb housing prices. Its regulatory policies of restricting demands through imposing heavy taxes and strict regulations on reconstruction produced only negative results. Also, its expanding housing supplies near Seoul had merely lackluster effect. The recent breakdown of public trust in government policies resulted in increased housing prices across the country.

In the process of preparing additional land for new towns, massive amounts of compensation money were released, which is likely to fuel real estate price hikes. In the case of Pangyo New Town, the compensation money was set at 2.4 trillion won, but later shot up to 3.1 trillion won. Without appropriate countermeasures, increased supply may accompany negative impacts as significant as positive impacts.

Simply providing more houses will not resolve fundamental problems. As household income goes up, more people will seek quality of life, pushing up demand for quality housing environment with infrastructure in education, culture, environment and medical care. The government should learn from its mistake of fueling middle-and-large-size apartment prices in Gangnam by ignoring demands for high-quality household and pushing for the construction of small-sized houses.

Along with supply quality housing, it also should ease taxes and regulations in non-speculation sectors. It should remember that it cannot succeed in housing and real estate policies if it continues to pander to bellyaching among the less affluent. The government should carry out policies that meet market principles and changing demand and correct its real estate policy direction.