Moon Administration's Achilles' Heel 'Real Estate Instability'... Blue House and Ruling Party Tense Over Potential Lame Duck Spark

Young Generation Who Supported President Moon Disappointed by Real Estate Policies... "The Top Livelihood Issue Is Real Estate Measures" President Moon Urges Speed in Policy Implementation

[Asia Economy Reporter Ryu Jeong-min] #On the 16th of last month, the results of the subscription for the 84㎡ (exclusive area) B-type apartments at 'Le El Sinbanpo Park Avenue' in Jamwon-dong, Seocho-gu, Seoul were announced. There were 1,400 applicants for 22 units, showing a competition rate of 63.64 to 1. The sale price of the apartment reached 1.675 billion KRW, but the average subscription score of the winners was 67.18 points. This score requires a perfect score (17 points) for more than 15 years of subscription to the housing subscription savings account, more than 12 years of non-homeownership period (26 points), and a dependent family of four, including a spouse and three children (25 points).

#An 84㎡ apartment at 'Acro Riverview Sinbanpo' in Jamwon-dong, Seocho-gu was sold for 2.8 billion KRW on the 5th of last month. It is a newly built apartment constructed in 2018. The market prices of newly built apartments in the 'Gangnam 3 districts (Gangnam, Seocho, Songpa)' are beyond imagination. Winning an apartment subscription is linked to expectations of enormous price gains. Not everyone can get a chance at the 'lottery subscription.' For people in their 20s and 30s, it is practically an unattainable dream. Besides the limitations in cash mobilization ability, they inevitably fall behind in the competition for dependent family points.

[Image source=Yonhap News]

The current state of the real estate market thus gives a sense of deprivation to the younger generation. They trusted and supported the Moon Jae-in administration but are now facing a disappointing reality. President Moon Jae-in stated in his New Year's address on January 7 that "we will never lose the war against real estate speculation."

In fact, the Ministry of Land, Infrastructure and Transport announced strong real estate measures to calm market anxiety, but reality is moving in a different direction than expected. President Moon's emergency summons of Minister Kim Hyun-mi of the Ministry of Land, Infrastructure and Transport to the Blue House on the 2nd reflects the seriousness of the situation.

At the Blue House senior secretaries and aides meeting on the 6th, President Moon also said, "The top priority for people's livelihood right now is real estate measures," urging special attention. He instructed to prepare real estate policies swiftly to put out the urgent fire. The tension sensed at the Blue House and ruling party is because real estate instability could become the Achilles' heel of the Moon Jae-in administration.

If real estate instability is not resolved, other policy achievements will be overshadowed, and the Moon Jae-in administration's 'mismanagement' could be imprinted. The trend among the younger generation, who were the main force behind the Moon Jae-in administration's launch and gave the Democratic Party a sweeping victory in the general election, is troubling.

[Image source=Yonhap News]

This means that beyond a temporary drop in approval ratings in opinion polls, it could lead to a fracture in the support base. If the real estate issue becomes the 'spark of a lame duck,' the political landscape will be shaken and could lead to a tectonic shift in the next presidential election.

It is also noteworthy that criticism is coming from pro-government groups. Professor Cho Ki-sook of Ewha Womans University Graduate School of International Studies, who served as the spokesperson for the Roh Moo-hyun administration's Blue House, wrote on Facebook on the 6th that "the biggest failure of the current government's real estate policy is the expansion of the rental business policy introduced by the Park Geun-hye administration."

The Moon Jae-in administration induced multi-homeowners to register as rental business operators by providing tax benefits, and this system is diagnosed as the root cause of the problem. This implies that the Moon Jae-in administration's real estate policy was flawed from the root and failed.

Real estate is a market influenced by psychological factors. When the government pays attention to real estate issues and intensively prepares measures, interest in the real estate market intensifies, leading to a vicious cycle of speculative demand inflow. Especially if the 'real estate invincibility myth' spreads that government measures have little effect, it becomes even more difficult to find solutions through the system.

Unless the mindset of people who want to increase their assets through real estate investment fundamentally changes, real estate measures cannot be a fundamental remedy. Professor Cho pointed out, "Recently, the increase in house prices is tens or hundreds of times the amount of taxes," adding, "It is natural to predict that people will hold on by selling one house until the regime changes."