The Participatory Government's Real Estate Failures... President Moon Aims to Avoid Repetition

Minister Kim Hyun-mi summoned to the Blue House, presents blueprint for real estate policy... "Determination to control housing prices is crucial, additional measures will be taken if necessary"

[Asia Economy Reporter Ryu Jeong-min] "The determination to definitely curb housing prices is important. If supplementary measures are needed, do not hesitate to create additional policies at any time."

This is what President Moon Jae-in said on the 2nd when he 'urgently summoned' Minister of Land, Infrastructure and Transport Kim Hyun-mi to the Blue House. As calls for Minister Kim's resignation spread mainly among opposition parties, he empowered her with full authority to support her and began damage control. The reason President Moon personally took charge of preparing real estate measures is not unrelated to the 'trauma' from the Participatory Government era.

President Moon, who served as Chief of Staff at the Blue House during the Participatory Government, witnessed the process in which the administration itself was shaken by real estate issues. Although the government proposed various solutions, apartment prices surged mainly in the metropolitan area. As a result, those who trusted the government and refrained from buying homes experienced a sense of loss.

[Image source=Yonhap News]

As the core support base of people in their 30s and 40s began to turn away, the government lost momentum in national governance, and ultimately the ruling party suffered a record defeat with over 5 million votes lost in the 2007 presidential election.

One of the Achilles' heels of the Participatory Government was the failure of real estate policy. The 'real estate trauma' is showing signs of reoccurrence in the Moon Jae-in administration as well. After the overwhelming victory in the 21st general election, the approval rating for government performance, which had been soaring, has shaken to the point of falling below 50%.

President Moon has taken out the comprehensive real estate tax (종합부동산세) card again. He has ordered the strengthening of the comprehensive real estate tax bill, which had been stalled in the 20th National Assembly due to the opposition majority, as the top legislative priority in the 21st National Assembly. During his meeting with Minister Kim, President Moon also presented the outline of real estate policy. The framework includes easing tax burdens for actual homebuyers, regulating speculative purchases by multi-homeowners, expanding supply volumes in the metropolitan area, and increasing pre-sale volumes for the 3rd new town projects.

President Moon said, "We must definitely reduce the burden on actual buyers, first-time homebuyers, and low-income people living in monthly rent or jeonse (long-term deposit lease)," and instructed, "Consider measures to ease tax burdens for youth, newlyweds, and other first-time buyers."

[Image source=Yonhap News]

Additionally, President Moon said, "Strengthen the burden on speculative homeowners such as multi-homeowners," and explained, "There is a high public consensus that speculative purchases should be regulated." He also added instructions to increase supply volumes further, recognizing that although 770,000 housing units have been secured through public land in the metropolitan area, it is still insufficient.

In this regard, President Moon instructed to devise plans to expand the pre-sale volumes of the 3rd new town projects scheduled to be implemented next year. The Ministry of Land, Infrastructure and Transport has decided to prepare additional measures promptly through consultations with related ministries.

President Moon's sense of crisis seems to have transferred directly to the Democratic Party of Korea. On the 3rd, Lee Hae-chan, leader of the Democratic Party, apologized, saying, "The recent real estate market has been very unstable, and I deeply apologize to the people."

At the Supreme Council meeting that day, Leader Lee said, "It is clear that emergency measures and financial regulations alone have limitations," and responded to President Moon's sense of crisis by stating, "The party will swiftly prepare fundamental and systematic measures."