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(EDITORIAL from Korea Times on April 15)

Editorials from Korean dailies 07:04 April 15, 2022

Next government should stabilize home prices early on

Old apartment complexes expected to be redeveloped in the Seoul metro region have been attracting potential buyers again, resulting in residential property prices in the capital starting to rise again. According to housing market analysts, apartment prices in Seoul stopped declines seen during the past 11 weeks and turned steady as of April 4. Housing prices, which had remained calm amid the rising interest rate and economic uncertainties at home and abroad, now show signs of instability.

The rebounding price of apartments in complexes slated for reconstruction in the capital and its satellite towns is due to rising expectations about the next administration's lifting of real estate regulations, speeding up rebuilding projects. As a presidential candidate, President-elect Yoon Suk-yeol poured out deregulatory pledges, such as relaxing the withdrawal of excess profits from reconstruction, revising price ceilings on new apartments, and increasing lending limits. As a result, out of the 149 homes traded in Seoul during the three weeks after the election, 30 percent were sold at the highest prices, reflecting widespread expectations of further price rises.

True, home prices surged during the incumbent administration because of its regulation-oriented housing policy, which prioritized stifling housing demand and limiting speculation instead of increasing the supply of homes. However, hasty deregulation bound by campaign pledges may send the wrong signal to the property market. Short-sighted policy flip-flops only increase the damage to end-users. Although it is important to allow the private sector to supply more homes, a speed battle that turns everything upside down in one fell swoop will lead to uncontrollable adverse effects.

If the redevelopment of old apartment complexes proceeds simultaneously, that process will push up the prices of flats in surrounding complexes, too. Therefore, the government needs to take a cautious approach by differentiating the starts of apartment complex reconstruction projects while clamping down on disruptions to an orderly housing market. In this deteriorating economic situation hit by global interest rate hikes and soaring inflation, even a small mistake in real estate policy will spill over to cripple the entire economy. If policy makers fail to work out a strategy that comprehensively considers demand, supply, inflation and the overall economy, the incoming administration will not be able to stabilize housing prices.
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