Sharp Criticism Extends to Participatory Government Officials... Trust in Real Estate Policy Hits Rock Bottom

"Rising Housing Prices Blamed on Speculation" Is a Misguided Approach... Repeating Failures in Real Estate Policies
Experts Say "Mole Whacking-Style Regulations Only Strengthened Housing Market Resistance"
"Gangnam, Multi-Homeowners, Gap Investments Targeted... Policy Starting Point Needs Reevaluation"

[Asia Economy Reporters Inho Yoo, Yuri Kim, Donghyun Choi] The government’s credibility is rapidly declining as it mentions the possibility of additional supplementary measures just two weeks after announcing the June 17 real estate measures. Despite as many as twenty-one rounds of major and minor government policies, the expected stabilization of housing prices has not been achieved; instead, side effects such as the 'balloon effect' and 'straw effect' have only increased public confusion. This is evidenced by Professor Gisook Cho of Ewha Womans University Graduate School of International Studies, who served as the spokesperson for the Roh Moo-hyun administration, sharply criticizing the real estate measures on Facebook on the 28th, stating, "It is necessary to verify whether President Moon Jae-in’s understanding of real estate is accurate." Market experts also point out that it is now time for the government to review its mistakes. They argue that instead of imposing regulations with a 'block first' approach, policies should focus on increasing supply to balance market demand and supply.

◆Regulation → Balloon → Supplementary Measures → Reverse Balloon, The Repeated 'Paradox of Regulation'?Until When?

Since its inauguration in May 2017, the current government has issued measures approximately once every 50 days on average, which critics say has only increased market resistance. Yang Ji-young, head of Yang Ji-young R&C Research Institute, said, "The government has not issued comprehensive large-scale measures at once but has been focused on short-term housing price control in a whack-a-mole fashion, causing the market to calm down temporarily and then rise again repeatedly," adding, "The biggest cause of this market resistance is the government’s failure to provide trust in its policies."

In fact, the June 17 real estate measures, considered the strongest ever, are already being evaluated as a 'complete failure' before the ink has even dried. In regulated areas, a 'reverse balloon effect' occurs where last-minute demand surges before the implementation of the system, causing housing prices to skyrocket, while in areas avoiding regulation, a 'balloon effect' appears as new investment demand floods in, repeatedly occurring with each measure.

Specifically, in the June 17 real estate measures, housing price increases in non-regulated areas such as Gimpo and Paju in Gyeonggi Province have been uncontrollably strong. As of the 22nd, Gimpo recorded a weekly apartment price increase rate of 1.88%, ranking first nationwide, soaring 94 times compared to the previous week’s increase. During the same period, Paju rose by 0.27%, showing the highest increase since September 2015. Some apartments in areas designated as land transaction permission zones, such as Daechi, Samsung, and Cheongdam-dong in Gangnam-gu, Seoul, and Jamsil-dong in Songpa-gu, recorded new high prices during the week before the system’s implementation on the 23rd.

Moreover, after the June 17 real estate measures, a reverse balloon effect has appeared centered on 'Geumgwan-gu (Geumcheon, Gwanak, Guro) and Nodo-gang (Nowon, Dobong, Gangbuk)' in Seoul, where mid-to-low-priced apartments are concentrated. The government’s real estate regulations have ironically become a momentum for rising prices of mid-tier apartments in Seoul. Seo Jin-hyung, president of the Korea Real Estate Society and professor at Gyeongin National University, analyzed, "Real estate is an economic good in the market, so when investment returns occur, funds move toward where returns are generated. If there are regulations, funds move like living organisms to unregulated areas," adding, "When all areas are regulated, funds move toward areas with higher investment returns."

◆"Wrong Approach Is the Cause of Policy Failure," Experts Point Out

Real estate experts unanimously diagnose that the government’s policy starting point was wrong. They say that if a doctor misdiagnoses, proper treatment is impossible. Experts analyze that the government’s real estate policies have targeted three main groups. Initially, the regulation target was Gangnam. Next, it was multi-homeowner speculators. Now, it is real buyers aiming for gap investment.

The result of the measures is 'market confusion,' not 'market stabilization.' Housing prices in Gangnam continue to soar. Multi-homeowners are not putting their houses on the market. Furthermore, due to loan regulations, real buyers’ chances of owning homes have vanished, and the instability of the rental market has only worsened housing insecurity for ordinary citizens. Professor Kyo-uhn Shim of Konkuk University’s Department of Real Estate said, "Since the diagnosis was wrong, the measures’ impact is inevitably limited," adding, "Policy should not turn into an emotional battle. Defining the market as bad from the start will not solve the problem."

Experts point out that the government should shift the policy focus to the market. Professor Daejung Kwon of Myongji University Graduate School of Real Estate said, "The reason the market does not trust the policy is because of regulation without supply," adding, "People buy houses because of fears that supply will no longer exist." If this policy framework does not change, the cycle of 'regulation → balloon → regulation' will inevitably repeat.

Experts advise that it is now time for the government to signal an increase in supply to the market. Kim Hak-ryul, director of Smart Tube Real Estate Research Institute, said, "The government needs to instill the perception that a certain number of households will be steadily supplied every year," adding, "Currently, there is anxiety that supply is decreasing every year." Professor Kwon emphasized, "The government thinks there are enough houses, but that is not true. Even if 100% of housing is allocated, not everyone shares it," stressing, "The government must revitalize redevelopment and reconstruction to send a signal to the market that 'supply will increase.'"

[Image source=Yonhap News]

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