[Column] Moving the Capital to Control Housing Prices?

[Asia Economy Reporter Lee Chun-hee] The housing price measures suddenly sparked controversy over relocating the administrative capital. It originated from a remark made by Kim Tae-nyeon, the floor leader of the Democratic Party of Korea, who said, "It can alleviate the overcrowding in the metropolitan area and real estate problems." This marks the revival of the capital relocation debate 16 years after the Constitutional Court ruled in 2004 that it violated customary constitutional law.

Relocating the capital is a 'century-long plan' that requires numerous agreements and careful consideration. Sudden discussions are hard to dismiss as a patchwork solution that emerged as approval ratings wavered due to successive failures in real estate policies. On the internet, there are even sarcastic remarks like, "To achieve balanced national development, we should move the capital every 20 years."

It is also uncertain whether it will resolve the overcrowding in the metropolitan area. Many senior officials of ministries that moved to Sejong still commute from Seoul. The economic logic behind rising housing prices is employment concentration and proximity between residence and workplace. Overcrowding will not be immediately resolved by relocating administrative offices, yet the idea of moving the capital is being proposed recklessly as a solution.

It is already causing a counterproductive effect by stimulating housing prices in Sejong. A licensed real estate agent said, "Prices are already crazy," adding, "It will pour fuel on the soaring housing prices in Sejong." Housing prices in Sejong have already surged 21.4% this year, the steepest rise nationwide. The land market is also stirring amid expectations that development will expand to peripheral areas.

There is no choice but to point out that the government's real estate measures have repeatedly focused only on housing prices in the metropolitan area while being insensitive to local regions. When the government designated Daejeon as a regulated area under the June 17 measures, the industry evaluated it as 'too little, too late.' Although housing prices in Daejeon have been steadily rising since last year, the Ministry of Land, Infrastructure and Transport only repeated that it was "closely monitoring" the situation without presenting substantial measures, and only designated it as a regulated area after several months. The housing price increase rate in Seo-gu and Yuseong-gu of Daejeon has already exceeded 10% this year.

The ruling party says, "We cannot ignore such a major issue of a century-long plan," but it is difficult to find a perspective that looks ahead a hundred years. The government and ruling party have already brought about the failure of real estate policies through repeated patchwork measures. Now, by dragging in the capital relocation issue, they are only fueling controversy. If they want to eliminate unnecessary misunderstandings, they must first present proper measures to stabilize housing prices. Discussions on relocating the administrative capital can wait until then.

On the afternoon of the 22nd, a citizen inquiring about apartment listings and a real estate agent are discussing while looking at a map at a real estate agency in Sejong City.
[Image source=Yonhap News]

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