[2020 National Audit] Opposition: "People Don't Trust Korea Appraisal Board Statistics" vs Ruling Party: "Private Statistics Have Limitations" (Summary)

Minister of Land, Infrastructure and Transport Kim Hyun-mi is reporting on duties at the National Assembly Land, Infrastructure and Transport Committee's audit of the Ministry of Land, Infrastructure and Transport, the Administrative City Construction Agency, and the Saemangeum Development Agency held on the morning of the 16th at the Government Complex Sejong in Sejong City.
[Image source=Yonhap News]

[Asia Economy Reporter Lee Chun-hee] Real estate statistics have once again become a subject of controversy. Opposition lawmakers raised suspicions of manipulation in the Korea Appraisal Board's statistics, which are nationally certified, claiming they lack public trust, while ruling party lawmakers countered that private statistics have their own limitations.

At the Ministry of Land, Infrastructure and Transport's audit held at the Sejong Government Complex on the 16th, Song Eon-seok, a member of the National Assembly Land, Infrastructure and Transport Committee from the People Power Party, stated, "The Appraisal Board's statistics can change significantly depending on how the sample is handled," adding, "This is evidence that the sample is flawed."

Difference in Statistics between Korea Appraisal Board and KB Kookmin Bank Analyzed by Song Eon-seok, Member of the People Power Party (Source: National Assembly Broadcast Capture)

Song compared and analyzed the Seoul apartment sales price indices from the Korea Appraisal Board and KB Kookmin Bank, pointing out that the difference in growth rates between the two indices was as much as 38 times. According to Song's analysis, during the Lee Myung-bak administration (March 2008 to February 2013), the Appraisal Board's index decreased by 4.1%, from 89.7 to 86.0, while KB Kookmin Bank's index fell by 4.5%, from 91.1 to 87.0, resulting in a gap of 0.4 percentage points between the two institutions' statistics. During President Park Geun-hye's term, the difference in the sales price indices between the two institutions remained at about 2.1 percentage points, showing no significant increase.

However, after the inauguration of the Moon Jae-in administration, the growth rates of the two institutions began to show a marked difference. From May 2017, when President Moon took office, until last August, the Korea Appraisal Board's Seoul apartment sales price index rose by 15.7% (from 97.3 to 112.6). In contrast, KB Kookmin Bank's index increased by 30.9% (from 96.1 to 125.8), nearly double, resulting in a gap of 15.2 percentage points between the two institutions. Simply put, the gap increased 38 times compared to the Lee Myung-bak administration and 7 times compared to the Park Geun-hye administration.

In response, Minister of Land, Infrastructure and Transport Kim Hyun-mi explained, "The Korea Appraisal Board started compiling statistics in 2013," adding, "(Previous statistics) were recreated by the Appraisal Board based on KB Kookmin Bank's statistics, so it is natural that they are almost identical."

When Song asked, "Then do you acknowledge the widening gap after 2013?" Minister Kim replied, "KB Kookmin Bank's statistics are based on asking prices, so the gap inevitably widens during a rising market."

Song also raised suspicions about the Appraisal Board's statistical calculation method itself. He argued that it is more influenced by sample adjustments than real estate policies, and that each time adjustments are made annually, the Appraisal Board's statistics quickly catch up to KB Kookmin Bank's statistics. According to Song's analysis, around the times of annual sample adjustments since 2017, the average apartment sales price in Seoul surged by 6.0% to 12.9%. For example, during the adjustment in January 2019, the average sales price rose from 717.75 million won in December 2018 to 810.13 million won in January 2019, an increase of 92.38 million won, or 12.9%.

Minister Kim dismissed the suspicions, stating, "Sample adjustments involve a comprehensive redesign of the sample every five years, with partial adjustments made every January." Regarding the growth rates, she countered, "There are fluctuations in the sales price index growth rates after sample adjustments. Past governments saw changes of about 1.2% to 1.99%, and the current government has seen fluctuations of about 1% to 2%, so there is no significant difference."

Minister of Land, Infrastructure and Transport Kim Hyun-mi is reviewing documents while responding to questions from committee members during the National Assembly Land, Infrastructure and Transport Committee's audit of the Ministry of Land, Infrastructure and Transport, the Administrative City Construction Agency, and the Saemangeum Development Agency held at the Government Sejong Complex in Sejong City on the 16th.
[Photo by Yonhap News]

Ruling party lawmakers also responded. Hong Ki-won of the Democratic Party of Korea said, "The claim that the Moon Jae-in administration arbitrarily used real estate statistics to hide rising housing prices is not true," arguing instead that private statistics such as those from KB Kookmin Bank distort the housing market.

Regarding KB Kookmin Bank's statistics showing a 52% increase in the median price of Seoul apartments during the Moon administration, Hong explained, "Median price statistics represent the price change of the apartment in the middle when apartments are lined up by price," adding, "As new and reconstructed apartments continue to increase in Seoul, it is natural for the rise to be significant."

Hong also commented on the Korea Appraisal Board's 43% increase in the apartment actual transaction price index, saying, "The actual transaction price index reflects price changes of apartments that have been actually traded," and "Since this statistic mainly covers areas with frequent transactions such as new or reconstructed complexes, the price increase tends to be large."

Minister Kim Hyun-mi stated, "The Appraisal Board's housing statistics are nationally certified statistics and must be used," adding, "We plan to increase the sample size to improve the accuracy of the Appraisal Board's housing statistics."