[Viewpoint] Let's Establish a Real Estate Transaction Supervisory Agency

Sangwoo Park, Distinguished Professor, Graduate School of Engineering, Korea University

Watching the COVID-19 pandemic, one gains a renewed appreciation for the Korea Disease Control and Prevention Agency (KDCA), the institution leading the fight against this terrifying epidemic. The KDCA was established in 2003 by expanding and reorganizing the former National Institute of Health, which was under the Ministry of Health and Welfare, into an agency headed by a political appointee at the vice-ministerial level. According to Article 38 of the Government Organization Act, an agency under the Minister of Health and Welfare is mandated to handle quarantine, investigation, and inspection related to infectious diseases and various other illnesses. By establishing a more specialized organization under the Ministry of Health and Welfare, which is responsible for highly specialized areas among government ministries, rapid and expert responses can be ensured even in urgent situations like the outbreak of COVID-19.

Even aside from emergency preparedness, there are cases within the government where highly specialized tasks are performed by independent agencies rather than general civil service organizations. The Financial Supervisory Service (FSS) is a representative example. The FSS was established in 1999 under the "Act on the Establishment of Financial Supervisory Organizations." It functions as the executive body of the government agency, the Financial Supervisory Commission, and was formed by integrating four supervisory bodies: the Banking Supervisory Authority, Securities Supervisory Authority, Insurance Supervisory Authority, and Credit Management Fund. Its role is succinctly to crack down on and punish illegal, unlawful, and illicit financial transactions. Although such illegal activities do not escalate as rapidly as the COVID-19 crisis, they can arise like a poisonous mushroom at any time, and if left unchecked, their damage can affect the entire national economy. Therefore, the FSS’s existence is justifiably recognized as a core symbol of government authority.

So, what about the real estate market? Looking at nationwide apartment transaction volumes, there were approximately 950,000 transactions in 2017, about 860,000 in 2018, and around 810,000 in 2019. Truly, an enormous volume of real estate transactions occurs daily. However, there is no government agency that supervises the legality or illegality of these real estate transactions. The obligation to report actual transaction prices is imposed on individual real estate agents under the "Act on Reporting and Using Specified Real Estate Transaction Information." When mayors or county heads receive reports from real estate agents, they issue a certificate of report, during which a formal procedure called verification under the "Special Measures on Real Estate Registration Act" is conducted. At the central government level, the Ministry of Land, Infrastructure and Transport (MOLIT) is the main department responsible for managing the real estate market. Unfortunately, MOLIT is limited to policy formulation and market trend monitoring and lacks the means to crack down on abnormal transactions. The Korea Appraisal Board, a MOLIT-affiliated agency, performs similar functions but mainly focuses on market price surveys. Ultimately, the task of investigating and cracking down on abnormal transactions falls to civil servants at 226 local government offices nationwide, who generally handle multiple types of duties simultaneously and lack specialized tools to investigate and enforce regulations. Not only are there false reports of actual transaction prices, but also numerous illegal and illicit practices such as false advertising, misinformation, and collusion by manipulative forces, similar to those in the securities market, are rampant in real estate transactions. These wrongful acts are the main culprits behind the phenomenon of housing prices rising by hundreds of millions of won even in an era of population decline and low economic growth.

The government has declared war on real estate speculation. If it intends to wage war, it must be armed with appropriate weapons. That weapon is the establishment of a real estate transaction supervisory agency to make the real estate market transparent and clean. Based on this, if appropriate taxation is imposed where income exists, the speculative virus, which has long been ingrained in the public consciousness that money can be made through real estate, can be eradicated.

Park Sang-woo, Chair Professor, Graduate School of Engineering, Korea University