Real Estate Problems Must Be Solved with Market-Friendly Policies

The real estate market has fallen into turmoil due to government risk. As misguided policies have piled up, anxiety in the market has grown, and the supply-and-demand mechanism has also become paralyzed. With anti-speculation measures pouring out like a flood, conflict and confusion surrounding real estate have reached an extreme, and all economic actors are voicing their dissatisfaction.

Compared with other sectors, Korea’s real estate system and regulations have been heavily penetrated by socialist methods. Anti-market policies such as controlling prices and arbitrarily adjusting supply and demand at the government’s discretion are cases in point. Countless regulations—including the price ceiling system for pre-sale housing, limits on rent increase rates, restrictions on subscription applications and resale, and reconstruction regulations—are weighing heavily on people’s lives.

These regulations shrink the market and create side effects that harm consumers. The recently introduced three tenancy laws are bad laws that raise housing costs and markedly worsen the quality of housing for ordinary people. Both landlords and tenants will become victims of misguided regulation.

In addition to these anti-market policies, anti-capitalist regulations that deny the legitimacy of real estate ownership itself are being added. The concept of public ownership of land, which originated in socialist ideology, is making the problem worse. Systems that threaten ownership and property rights are fundamentally harmful to our lives.

The government’s stoking hatred toward homeowners and portraying real estate investment returns as unearned income threaten the very foundations of our society. Turning anti-rich sentiment into policy and abusing taxes as a punitive tool is the corruption of policymaking. This populist attitude also causes social conflict and is socially harmful. Setting homeowners against non-homeowners, and making landlords and tenants monitor and fight one another, is not the right policy direction.

Where does the cause of the government’s wrecking of the real estate market lie? It lies in its insistence on the wrong policy direction. First, it was wrong to brand the public as speculators and indiscriminately churn out anti-speculation measures. Second, it was wrong to treat supply as something sinful and prevent supply from responding smoothly to demand. Third, it was wrong to engage in showy administration that prioritizes public corporations’ sales and rentals over those of private companies. In a word, the chaos in real estate is the government’s responsibility. The administration deserves criticism for being amateurish and out of touch with reality.

The government refuses to acknowledge its policy failure and instead blames speculators and the previous administration. As long as it turns away from reality like this, it cannot solve the real estate problem. Under these circumstances, it is difficult to expect market stability for quite some time to come. For the real estate market to regain stability, policy must shift in a market-friendly direction. Only then can ordinary people enjoy high-quality housing services at affordable housing costs.

Sung-no Choi, President, Center for Free Enterprise (CFE)

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Original title: 부동산 문제, 시장친화적으로 풀어야

Author: Sung-no Choi

Date: 2020-08-19

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=19&idx=23014