Real Estate Regulations That Help No One

Property rights are vital to the functioning of a market economy; without a guarantee of the right to property, the very idea of a market economy cannot be established. Yet the government is now jointly attacking property rights together with the media through all kinds of taxes and regulations. At best, this is dismantling the very foundation of the market economy, and it is plainly wrong.

Current real estate policy is misguided by a misunderstanding of what it means to buy and sell homes. Stabilizing real estate prices fundamentally means stabilizing the market itself. Nevertheless, rhetoric centered on home “prices” has misled the government.

As a result, the government and its policies lost sight of the basic principle of stabilizing the housing market itself. Prices formed through the natural balance of supply and demand were then artificially manipulated. This only triggered greater chaos not only in the market but also in prices themselves, which were the source of the government’s delusion.

Housing prices can never be the policy target. Stability can be achieved only through a natural balance between supply and demand in the market. Only then can market participants ultimately benefit and be satisfied. Yet the government created rigid barriers that prevented supply and demand from meeting.

Such unnatural intervention pushed and pulled unwilling buyers and sellers in the market, stirring up even greater instability. That instability then turned into fragility and volatility for both the market and its participants. Through this process, real estate policy produced various balloon effects and unnecessary price competition within the market.

What is needed now is to reduce uncertainty over prices and stabilize the housing market. Quality housing must be supplied throughout the country, not only in Seoul. Rather than forcibly suppressing unavoidable demand, sound policymaking and governance require timely supply that meets existing demand.

The recent chaos in the housing market rests on an irony. The government’s policies are based on a misreading of speculative demand and a lack of housing supply. If speculation were truly the issue, speculative demand should have spread to regions outside Seoul as well.

If the problem were a lack of supply, then additional housing should have been supplied in areas where prices were higher. Nevertheless, what the government chose was to suppress existing demand and inject unwanted supply. This accelerated the influx of speculators, and obtaining affordable housing in Seoul has now become nearly impossible.

Seoul is a megacity through which half the nation’s population moves in and out. Many public- and private-sector jobs are concentrated there. The invisible yet immense value of the region cannot simply be reduced to a “single appropriate price.” Blaming speculators for rising prices in the market is both mistaken and a form of scapegoating.

If the government had been serious about bringing down prices, it should have implemented reasonable and sound real estate policies based on a full understanding of this reality. Instead, intellectual laziness and a sense of moral superiority led it to demonize people who wanted to make their homes in Seoul, a city that had every means and reason to attract them.

If stable and rational real estate prices are to be achieved, excessive market regulations must be removed and policies aligned with market principles must be introduced. High-quality housing should be supplied in areas with stronger demand. Only with such a policy direction and its results can the real estate market function in a way that improves our lives.

This is the exact opposite of what the government is currently pursuing. Yet the needs of those seeking housing can be satisfied only through a complete shift in attitude and action. The government must break free from its long-standing delusion that it can control the market and root out speculators. Experimentalism and an obsession with regulatory schemes have already long proved to be failures.

Wrong policies based on a wrong diagnosis can never produce meaningful results. Demonizing residence in Seoul instead led to rising prices in Seoul’s housing market. Conflict and envy were intensified in that atmosphere.

Only the supply of affordable, high-quality housing can solve this chaos. A life spent constantly worrying about where to live can never be fruitful or prosperous. Real estate should serve as a means of continuously bringing quality housing to the market, which will ultimately make people’s lives more stable and happier.

Sung-no Choi is president of the Center for Free Enterprise.

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Original title: Real estate regulations for no one

Author: Sung-no Choi

Date: 2021-02-22

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=23527