[Deputy Manager Column] Why Overconfident Claims in Real Estate Are Risky

[Asia Economy Reporter Ryu Jeong-min] "I believe the rapid rise in real estate prices must be restored to their original state." The real estate market is unsettled by President Moon Jae-in's remarks. These words were delivered by the nation's highest official during the New Year's press conference broadcast live on TV.

This statement reflects the Blue House's determination to curb real estate speculation. The government is wielding a 'sword.' Who would not feel fear when the dance of real estate sanctions reaches its climax? Tightening real estate loans and imposing tax bombs rapidly weaken the 'market's dynamism.' The problem lies in what comes next.

The reason the phrase 'real estate invincibility myth' maintains its vitality is the belief that the government's 'sanction period' does not last forever. When the relevant government policies change or a 'power shift' occurs and a new administration takes office, the real estate market environment changes.

[Image source=Yonhap News]

This is why the market holds its breath and waits rather than confront the government. Real estate is a market intertwined with the complex and subtle 'psychological realm' of humans. It means that the desire to become wealthy, the ambition for financial investment, and the sense of deprivation from others' success collectively form the flow.

Is President Moon's real estate message a statement that considers all real estate psychological variables? The strong message, "We will never lose the war against real estate speculation," could come back as a boomerang. President Moon's real estate remarks are not unrelated to the pains of the Roh Moo-hyun administration era.

During the Roh administration, which was believed to be the 'friend of the common people,' the real estate market experienced a 'boom period,' so imagine the sense of deprivation and betrayal. The Grand National Party's landslide victory with over 5 million votes in the 2007 presidential election is also related to the critical sentiment toward the Roh administration's real estate policy failures. It may be natural that President Moon, who once served as Chief of the Presidential Secretariat, shows a special interest in real estate issues.

The problem is the aftershock that the president's bold promises may cause. President Moon pointed out the rapid price increase and expressed his will for 'restoration.' What does restoration of real estate mean? Based on when and to what extent should price adjustments be made to be considered restoration? If apartment prices in Seoul Gangnam, Gyeonggi Bundang, Gwacheon, and other areas adjust to the levels before the Moon Jae-in administration, would that be restoration?

Can that be defined as a victory in the war against real estate speculation? Even if temporary price adjustments succeed, it is far from solving the fundamental problem. If the long-standing market belief that real estate is a useful financial investment tool does not fundamentally change, won't the 'effectiveness' of the government's sword dance eventually show its limits?