Preemptive policy steps needed to block speculative mindset
Apartment prices in some unregulated areas of the Seoul metropolitan region have shown signs of a resurgence, prompting the government to vow to take strong anti-speculative measures.
Minister of Economy and Finance Hong Nam-ki said Thursday that he would work out appropriate policies at any signs of instability in the housing market and implement them without hesitation. The rise in housing prices is unusual considering the severe hit the economy has suffered from the COVID-19 pandemic. If left unchecked, it will exacerbate the already difficult lives of ordinary residents and deepen economic polarization.
The government needs to calm the speculative frenzy before the rise in housing costs spreads to the greater Seoul area. So far, the administration's real estate policies have been like a whack-a-mole game. They have failed to prevent the so-called balloon effect with prices in unregulated areas rising instead. All this shows why the government should nip this rekindled speculation in the bud instead of chasing speculators from behind.
According to the Korea Appraisal Board, housing prices in cities around Seoul have climbed by between 3 percent and 6.9 percent over the past three months. Property market experts called for most of these cities to be designated as speculation-prone areas in February; however, policymakers left them intact, causing suspicions about “appeasement” ahead of the then-upcoming general election.
Last December, the Moon Jae-in administration unveiled an unprecedentedly firm anti-speculation policy, banning mortgage lending to people buying apartments priced at 1.5 billion won ($1.2 million) or higher, and putting a strict ceiling on new apartment prices. Housing prices in Seoul's Gangnam area have since shown relative stability.
Experts say, however, that the government can ill afford to remain complacent because economic stimulus measures to get out of coronavirus-triggered slump could lead to overflowing liquidity. No less critical in calming speculative fervor is a sufficient supply of homes. The Moon administration ought to speed up the third-phase construction of new towns around Seoul and keep its promise to supply an average 250,000 new homes each year.