(EDITORIAL from Korea Times on Jan. 3)

Rise of rental deposits
: New anti-speculation measures produce ill effects

The housing market is showing no signs of stability. It is ironic that rental deposits called "jeonse" (aka key money) are beginning to resurge only two weeks after the government announced new measures to stabilize the real estate market. Whenever the Moon Jae-in administration has unveiled new anti-speculation steps, side effects have eclipsed any of the good intentions of policymakers. The latest case seems to be no exception

"The government is closely watching the jeonse market," Minister of Economy and Finance Hong Nam-ki said Tuesday. "We are ready to come up with additional steps." The new government policy, which came Dec. 16, was the 18th such package under the Moon administration. If Hong's remarks become a reality, the 19th package seems to be just a matter of time. Jeonse is a home rental arrangement in which tenants pay a lump sum as a rental deposit instead of paying monthly fees.

A year ago, the problem was the fall of deposit rates, forcing many landlords to borrow money as they could not repay the deposit when the rental contract expired and the rate decreased. That changed when the Moon administration unveiled a new education policy late last year, pushing up rental prices in good school districts in Seoul, particularly Gangnam. The Dec. 16 measures added fuel to the rising trend of rental deposits due to a higher property holding tax, the burden of which homeowners passed on to their tenants. If the market instability continues, a new anti-speculation package will be necessary to again bring soaring rents and home prices under control.

"Housing policy, which is directly linked to people's livelihoods should not be left to the market," said Minister of Land, Transport and Infrastructure Kim Hyun-mi. However, the market is not where good intentions guarantee desired results as it is governed, to a large extent, by supply and demand. We hope Moon's economic team will work out policy measures, taking into account macroeconomic factors such as ample liquidity amid record low interest rates which are stoking speculation.
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