[Desk Column] Real Estate Politics, Now Is the Time to Step Away

[Asia Economy Jeong Doohwan, Deputy Director and Head of Construction and Real Estate Department] "The feast is over, and only countless real estate pledge (空約) trash remains on the streets." This was said during a post-election conversation with acquaintances right after the April 15 general election.

The controversy over empty promises made by politicians during every election is nothing new. In every large and small election, regardless of ruling or opposition candidates, 'real estate pledges' are a staple menu. In this general election as well, the keyword search volume for 'real estate' was 5.8 (with the maximum search volume set at 100) on one portal, overwhelmingly surpassing other political issues such as former Minister of Justice Cho Kuk (1.34) and North Korea (2.67). Another portal's big data analysis also reported that interest in 'real estate' ranked first for 90 consecutive days leading up to the election. Real estate is an irresistible temptation in politics represented by elections, whether positively or negatively.

In fact, every time the administration changed, real estate was the top priority in pledges. The Participatory Government raised the slogan "We will control the housing prices in Gangnam" and brought real estate into the realm of serious politics throughout its five years in power. The Lee Myung-bak administration made a sweet pledge to supply 'half-price apartments' by releasing affordable Greenbelt areas. The Park Geun-hye administration ambitiously promised to build affordable rental housing on top of railroads in its pledge book. Ultimately, the pledges made by the previous three administrations all ended in failure. The Participatory Government eventually admitted defeat against Gangnam housing prices, Lee Myung-bak's half-price apartments fizzled out, and Park Geun-hye's railroad housing project was scrapped without even breaking ground. This government is no different. The top priority of real estate policy is 'controlling housing prices.' During the three years of the Moon Jae-in administration, there were 19 measures aimed at controlling housing prices. In this process, the public was divided into political frames of either 'homeless low-income citizens' or 'multi-home speculators,' whether they liked it or not.

Recently, the soaring housing prices seem to be stabilizing. Housing prices in the Gangnam area, which led the price surge, have shown a clear downward trend since March. The balloon effect in the outskirts of the metropolitan area is also subsiding.

But is it really time to welcome the price drop as a policy success? Looking at past cases, housing price declines almost invariably coincided with economic recessions. Housing prices fell right after the 1997 foreign exchange crisis and during the 2008 financial crisis?times when companies and households faced the threat of bankruptcy. The current situation resembles those times. Recently, the Korea Insurance Research Institute issued a report warning of the risks posed by falling housing prices. The core message of the report is that if housing prices plummet while household debt exceeds a certain level, it could shrink household consumption and accelerate economic downturn.

Even without this warning, experts point out that the claim that a sharp drop in housing prices will make homeownership easier is too simplistic. This is due to the structural characteristic of our economy, where most middle-class assets are concentrated in 'one house.' Excessive asset value decline dampens consumer sentiment, dealing a blow to an already struggling real economy. In a situation where people cannot find jobs, incomes are reduced, and debts accumulate, it cannot be confidently said that falling housing prices bring homeownership closer.

As a result, the government’s real estate policy is also in a dilemma. It cannot push forward a regulation-only policy that would excessively encourage housing price declines, nor can it reverse existing policies and use stimulus measures to defend housing prices. This is the dilemma brought about by policies obsessed only with 'price.'

However, if we change our perspective, the recent market situation is also a good opportunity to normalize real estate policy. It has created an environment where we can shift to proper mid- to long-term real estate policies, free from the shackles of 'price.'

This is not a call to unconditionally loosen regulations. Rather, the market demands that anti-market elements be removed from policies and a rational policy framework that can be maintained permanently be established. Even if not a century-long plan, at least predictable policies are urgently needed. Policies that drastically loosen regulations when housing prices fall and tighten the market when prices rise must not be repeated. The public is tired of real estate politics that flip-flop like turning over a hand every time the administration changes. It is time to let go of real estate in politics.

This content was produced with the assistance of AI translation services.