'Real Estate Regulatory Agency' That Even Government and Academia Find Puzzling

Ministry of Land, National Tax Service, Financial Services Commission, Financial Supervisory Service, Ministry of Economy and Finance Participate
Experts Say "Post-Monitoring Is Insufficient for Market Supervision"

[Image source=Yonhap News]

[Asia Economy Reporters Kwangho Lee, Sehee Jang] The outline of the 'Real Estate Market Supervisory Organization' mentioned by President Moon Jae-in is expected to be revealed as early as next week. The real estate market supervisory organization is anticipated to take a form similar to the Financial Supervisory Service, which oversees financial markets and institutions. However, since there is no precedent worldwide for an organization supervising the real estate market, controversy over excessive market intervention seems inevitable. Additionally, as the Ministry of Land, Infrastructure and Transport is conducting crackdowns through a special response team formed jointly with various ministries, there are also criticisms that its effectiveness is limited.

According to the government on the 11th, Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki will discuss this matter at the 'Real Estate Market Inspection Meeting of Related Ministers' scheduled for the 12th.

At a press briefing held at the Government Complex Sejong on the afternoon of the previous day (the 10th), Deputy Prime Minister Hong stated, "We will review (the establishment of the supervisory organization) at the Real Estate Market Inspection Meeting of Related Ministers." However, he was cautious, saying, "We are not inspecting on the premise of introducing (the supervisory organization), but we will examine various possibilities and announce the results if necessary."

It is expected that the meeting will consider enacting a special law for the permanent establishment of the organization. There is analysis that the role and scale of the 'Real Estate Market Illegal Activities Response Team,' newly established by the Ministry of Land in February, will be expanded to serve as an independent supervisory organization. The government has already formed a response team composed of personnel dispatched from the Ministry of Land, the prosecution, police, National Tax Service, Financial Services Commission, Financial Supervisory Service, and Korea Appraisal Board to investigate illegal activities in the real estate market.

Furthermore, the ruling party is raising the necessity of establishing a 'Housing Agency,' which former President Roh Moo-hyun had worked hard on but was ultimately scrapped. However, since this would require revising the Government Organization Act, the outlook is that it will not be easy.

There is also a strong skeptical view within the government. It is unclear to what extent management and supervision should be conducted, and if the organization is created, it must produce results. A government official said, "There is a possibility of overlap since the Ministry of Land, Financial Supervisory Service, and others already have their respective roles," adding, "Once the organization is established, additional sanctions will inevitably be strengthened." This is because a new management and supervisory organization must deliver results accordingly.

Experts point out the limitations of management and supervision through administrative organizations. Professor Jae-hoon Koo of Hanyang University’s Department of Real Estate said, "Basically, the plan is to supervise by observing market outcomes, but there are limits to controlling the market through after-the-fact supervision." He emphasized, "Since employment increases in Seoul, housing demand rises, causing house prices to go up. Fundamental issues such as resolving regional employment disparities must be addressed."

Professor Jiyong Hong of Incheon University’s Department of Economics said, "Management and supervision are currently being conducted through the Financial Intelligence Unit and the Real Estate Market Illegal Activities Response Team," adding, "Creating a new organization would cause severe budget waste due to enormous administrative inefficiency." He continued, "Because the government regulates prices through taxes and other means, deviating from market economy principles in the real estate market, administrative side effects continue to appear."

Meanwhile, Deputy Prime Minister Hong explained regarding criticism that the recent tax law amendment, which strengthened taxation on multi-homeowners, is a 'tax bomb,' saying, "Considering the instability in the housing market and the resulting social costs, strengthening the tax burden on them was inevitable." He added, "To protect single-homeowners with actual residence purposes, we plan to announce a plan to lower property tax rates for mid- to low-priced houses along with the October public price realization this year."