“It would be good for public officials to set a good example,” advised Prime Minister Chung Sye-kyun to senior government officials who own multiple real estates despite advice to dispose the assets. It would be a tough decision for the officials who are reluctant to sell in a demand-driven market, but would be criticized if they didn’t. If real estate prices are likely to fall with no sign of recovering in the near future, the officials would not need any prodding by any high-ranking official to sell. Coaxing to sell, as if undertaking a sacrifice, to set a good example, could be seen as a gesture to signal that real estate prices will not fall anytime soon.
Since the announcement of new real-estate regulations on June 17, realtors in the Jamsil area have reportedly spent several days working late into the night signing contracts, due to the surge of demand to buy ahead of tightening regulations. The government’s new measure, which requires buyers to seek formal approval to purchase real-estate in speculative areas, is seen as a signal to guarantee further price growth. Since the recent announcement, selling and rent prices of apartments have increased in weekly statistical data.
There were recent rumors that Deputy Prime Minister Hong Nam-ki would step down from his position and be replaced by Land, Infrastructure and Transportation Minister Kim Hyun-mi. Most brushed off the rumor as silly gossip, because it did not seem at all likely to appoint someone to the position without any background in economics. It occurred to me that it might not be a groundless rumor after all, when the minister appeared on television and commented that “there are several improvements that should be made by the government, such as property holding tax.”
No matter how much influence the minister has, it is extremely rare to have a minister overseeing housing supply to directly comment on the tax system, ahead of the deputy prime minister. Perhaps it would not appear unreasonable at all, for the government, which has declared war on housing prices, unveiled higher housing property tax, price ceiling system and transaction approval system, to appoint Kim as deputy prime minister.
Unlike politics, running the economy is not something that is done by force. Breaking the balance on one side would result in side effects on others and it is not even granted that the market would respond in the way that the government intends. There is an old saying that ensuring smooth flow, rather than blocking flow, is the basis for efficient water management. It rings true for real estate policy as well.
Kwang-Hyun Kim email@example.com