[Desk Column] Real Estate Advice, Let's Not Cross the Line

Jung Doohwan, Head of Construction and Real Estate Department

"If you buy a house in Gangnam, you will be ruined." "A house is not a place to buy, but a place to live." "Multi-homeowners should sell their extra houses."

These are roughly what I remember. They are real estate-related advice given to the public by every government in history. Perhaps because of the upcoming election, a flood of diverse opinions on real estate policies is pouring out from both inside and outside the government and ruling party.

The catalyst was the president's New Year's press conference. At President Moon Jae-in's remark, "We will present real estate measures until the end," everyone eagerly chimed in. Suddenly, the Blue House's Senior Secretary for Political Affairs stirred controversy over the 'housing transaction permit system,' and the newly appointed Prime Minister emphasized in his inaugural speech that "houses should not be subject to speculation or even be investment targets." The Mayor of Seoul repeatedly advocates for the introduction of a real estate 'national sharing system.' Lee In-young, the floor leader of the Democratic Party of Korea, reignited the debate on the concept of land by saying, "We will make it a topic for constitutional amendment."

Watching these relentless strong statements, some express concerns that certain claims have gone too far. The government and political circles are irresponsibly spouting radical ideas that could easily circulate on social media services (SNS). There are numerous claims that deny the market economy itself in order to control housing prices. Although the constitution recognizes restrictions on private property rights for the public interest, it clearly defines the limits. The principle is that restrictions should be minimal. The idea that one cannot buy or sell a house without permission, the notion that huge taxes should be collected from wealthy homeowners and landowners to build houses for ordinary citizens, and the perception that real estate should not be an investment target in a market economy are not only excessive but dangerously reckless.

Government and local authorities' intervention in the market is also going too far. A redevelopment project in the Gangnam area has not advanced a single step for years due to Seoul City's obstruction. The city is postponing related administrative procedures without special reasons. Although not publicly disclosed, the background is believed inside and outside Seoul City to be the stimulation of surrounding housing prices caused by large-scale redevelopment. In this process, even though the international design competition for redevelopment was completed two years ago, the city repeatedly delayed the authorization subcommittee, a prerequisite for paying design fees, causing the association to fail to pay the foreign design firm and suffer international embarrassment.

Recently, the delay in selecting a construction company for Hannam 3 District in Yongsan-gu, Seoul, is also pointed out by the industry as caused by excessive government intervention. The Ministry of Land, Infrastructure and Transport and Seoul City reported to the prosecution that guaranteeing general sale prices, deferring payment of shared costs, and excluding public rental housing by participating construction companies violated related laws and obstructed bidding, but the prosecution eventually dismissed the case without indictment, resulting only in embarrassment.

At this point, the clock of memory turns back to October 2017, early in the government's term. At that time, Chu Mi-ae, then leader of the Democratic Party (now Minister of Justice), ignited the debate on introducing a 'real estate holding tax' by bringing up Henry George's radical socialist theory of land value tax reform from the late 19th century, 140 years ago. The logic was that rising house and land prices are unearned income and should all be reclaimed through holding taxes to be used for social welfare.

The phrase hung on the lecture table at a forum held in the National Assembly members' office building at that time is still vivid: "The bear does the trick, but the land eats the moneyㅠㅠ" It is a typical divisive slogan, and it is worrying that even after two years, it still lingers in the government and political circles. Is the intention to divide the people into those who own houses and land and those who do not, to exploit this for elections? There is even a glimpse of a cunning attempt to exploit the psychology that people can endure hunger but cannot endure envy.

No matter how much we want to control housing prices or win elections, there is a line that must not be crossed. One wonders why there is even concern that "Are we trying to implement real estate socialism?"