[The Editors' Verdict] Soaring Housing Prices: Knowing How to Use Every Tool Is Key to Avoiding the Bamboo Stick

"I feel as if I have been struck by a bamboo stick and jolted awake by the verdict."

The ultimate measure of real estate policy is the stabilization of housing prices. However, former President Moon Jae-in admitted during a special address marking his fourth year in office that "a government that fails to achieve this has no excuse," acknowledging the painful reality that his administration was unable to calm the fervor of so-called "Yeongkkeul" (a term meaning 'scraping together every last resource') loans, which even swept up young people.

The administration at the time introduced 27 policy measures over five years. These efforts were aimed at achieving the "primary goal of curbing speculation and stabilizing prices through tax and financial regulations" (from "The Nation of Great People," Hans Media). Paradoxically, the more regulations were tightened, the higher housing prices soared. This was not unique to former President Moon. According to Refinitiv, the average increase in housing prices under progressive governments (23.8%) was higher than under conservative governments (12.8%). The stronger the progressive administrations' stance to control housing prices through regulations, the more sharply prices rose.

For President Lee Jaemyung, this became a source of trauma. Even before the presidential election, he distanced himself from the policy direction of previous progressive administrations. President Lee stated, "I will not try to control housing prices through taxes," and added, "Rather than focusing on curbing the rise in ultra-high-priced apartments, I will concentrate housing policy on increasing supply for the middle class and low-income households." More concrete policies mentioned include additional housing supply in the third generation new towns, development of idle sites in Seoul, and accelerating the development of public housing sites in the greater Seoul area (170,000 units).

However, the problem is that these are long-term solutions that cannot be guaranteed to be achieved within the current administration's term. In reality, there are virtually no idle sites left in Seoul for large-scale housing construction, and redevelopment or reconstruction projects, even if they get on track, take more than 15 years to complete. The first-generation new town reconstruction pilot project, which the previous administration had boldly promised would be ready for occupancy by 2027, now requires residents to move out this year just to make that possible. At present, even the necessary associations have not been established. As for the third-generation new towns announced in 2018, only the first complex has entered the main subscription phase this year, with occupancy possible only in 2028.

With this approach, it is difficult to address the current upward trend in housing prices. While the government has advocated for a cautious approach to the market and expanding housing supply, housing prices in Seoul have continued to rise and the trend is spreading to surrounding areas. In the third week of this month (as of the 16th), the apartment sales price in Seoul (0.35%, Korea Real Estate Board) recorded the largest increase in six years and nine months. This surge is not limited to the three Gangnam districts, but is also spreading to areas such as Seongdong and Mapo, where record-high prices are being reported. Seoul housing prices have risen for 20 consecutive weeks through the third week of this month.

The words of a president must carry weight. In diplomacy and national security, they determine the fate of the nation. In economic and social matters, they shape the lives of the people. The weight of this responsibility is immeasurable. However, there is concern that being burdened by this weight may be causing delays in addressing urgent issues. There is also worry that the trauma of past progressive administrations is becoming an obstacle in formulating new government policy. The longer the government hesitates, the more the market perceives the government as being silent or passive. If so, the bamboo stick of the previous administration may strike again.

If necessary, the government must also apply appropriate pressure to the market. In his inaugural address, President Lee said, "Whether it is Park Chunghee's policy or Kim Daejung's policy, if it is necessary and useful, I will use it without distinction. The Lee Jaemyung administration will be a pragmatic, market-oriented government." There is no reason real estate should be an exception. Whether the cat is black or white, if it can catch mice (avoid the bamboo stick), it should be used. Isn't this what this administration means by 'pragmatism'?