Controversy Over Differences in Korea Appraisal Board and KB Real Estate Statistics... Deputy Minister of Economy and Finance Says "Use Appropriately According to Purpose"

Kim Yong-beom, the 1st Vice Minister of the Ministry of Economy and Finance, is attending the '26th Innovation Growth Strategy Review Meeting and Policy Review Meeting' held at the Government Seoul Office in Jongno-gu, Seoul on the 18th. Photo by Kang Jin-hyung aymsdream@

[Sejong=Asia Economy Reporter Kim Hyunjung] Kim Yongbeom, the 1st Vice Minister of the Ministry of Economy and Finance, commented on the market controversy surrounding the differences in real estate price statistics between the Korea Appraisal Board and KB Kookmin Bank, stating, "It is advisable to understand the strengths and limitations of each statistic and use the statistics according to their intended purposes."

On the morning of the 19th, Kim said on his Facebook post, "Interest in the two statistics has increased significantly as some have raised doubts that the government might be emphasizing the usefulness of the Appraisal Board's statistics, which show a lower price increase rate, to support the effects of real estate policies."

He judged that the related controversy stemmed from the absence of market prices to refer to. To estimate prices, the Appraisal Board and KB apply statistics suited to their purposes, resulting in differences. Kim explained, "The Appraisal Board's goal is to prepare an indicator that represents the entire housing market in a balanced way as a standard for real estate policy. To this end, they first select a sample that best represents nationwide housing and calculate the housing price increase rate by estimating the prices of this sample weekly (or monthly). For the selected sample, actual transaction prices are applied to the portion traded during the period, and for the non-traded portion, prices estimated by professional investigators referencing the asking prices of the most similar complexes are applied."

He added, "On the other hand, KB's purpose is to estimate the appropriate collateral value for mortgage loans used by banks. Since the appropriate price (collateral value) that can be obtained if the house is put on the market at the current time is needed, the price is based on data directly input by cooperating licensed real estate agents who have the latest asking price information."

Kim emphasized, "It should be noted that both statistics reflect actual transaction prices, but for 'houses not traded in the market,' estimated values involving 'subjective human judgment' are used. These estimates tend to differ especially when the real estate market is rapidly changing or in a mixed trend. The KB statistics, which have a relatively higher proportion of asking prices reflected, tend to show a larger increase than the Appraisal Board's statistics during rising periods, and due to downward rigidity in falling periods, the decline is smaller, resulting in generally higher increase rates than the Appraisal Board's statistics."

He explained, "This is why the government mainly uses the Appraisal Board's statistics for policy purposes. If real estate market policies were established based on overestimated indicators, there is a high risk of causing side effects due to excessive regulation beyond what is necessary." He also added, "The Appraisal Board's statistics are 'national statistics' that use certified methodologies reviewed by experts and are not statistics that the government can manipulate to suit its preferences."

Kim also emphasized that the government is aware of the related controversy and mentioned, "The government also uses KB statistics as supplementary indicators to closely monitor the market."