Half Are 'No Charges', Yet Proposing Real Estate Regulatory Agency Installation?

Ministry of Land, Infrastructure and Transport's 'Real Estate Response Team'
Only 3 out of 110 cases punished

Concerns over overlapping roles and side effects even if a new independent agency is created

President Moon Jae-in is speaking at the Chief Secretary and Aide Meeting held at the Blue House on the afternoon of the 10th. [Image source=Yonhap News]

[Asia Economy Reporter Lee Chun-hee] As discussions on establishing a 'Real Estate Market Oversight Organization' triggered by President Moon Jae-in's remarks gain momentum, controversy is expected as it has been revealed that even the currently operating response organization is almost ineffective.

According to the Ministry of Strategy and Finance and the Ministry of Land, Infrastructure and Transport on the 12th, the government reportedly began reviewing the establishment of a real estate oversight organization starting with the Real Estate Market Inspection Ministerial Meeting held that day. This is a follow-up measure after President Moon mentioned at the Chief Secretary and Aide Meeting on the 10th that "if necessary, the establishment of a real estate market oversight organization will also be considered." The oversight organization is likely to be expanded and reorganized as a separate entity based on the 'Real Estate Market Illegal Activities Response Team,' which the government has been operating directly under the first vice minister of the Ministry of Land, Infrastructure and Transport since February.

Currently, the Real Estate Response Team is led by the Director of Land Policy at the Ministry of Land, Infrastructure and Transport and consists of eight special judicial police officers from the Ministry, and six dispatched personnel from the Financial Services Commission, prosecution, police, National Tax Service, Financial Supervisory Service, and Korea Appraisal Board. The team oversees investigations into actual real estate transactions and sources of funds, investigates criminal activities in the real estate market, manages the 'Real Estate Transaction Disorder Reporting Center' established at the Appraisal Board, and collects and analyzes information on illegal activities.

However, the actual performance of the Response Team is understood to be close to failing. According to the 'Real Estate Market Illegal Activities Response Team Activity Status' submitted by the Ministry of Land, Infrastructure and Transport to Kim Sang-hoon, a member of the National Assembly Land, Infrastructure and Transport Committee from the United Future Party, among 110 cases initiated and completed by the Response Team over six months from February to last month, 55 cases?half of them?were closed due to insufficient evidence or no charges.

In particular, among the remaining 55 cases, only 18 cases, accounting for 16.4% of all investigations, led to formal charges, and only 6 cases (5.5%) proceeded to prosecution. Of these, only 3 cases resulted in actual punishment, with one case receiving a suspension of indictment and two cases minor summary prosecutions. In effect, cases with substantial penalties are rare. However, 33 of the 55 cases were transferred to local governments such as Seoul (3 cases) and Gyeonggi (30 cases), and their outcomes remain unclear.

View of the apartment complex in Mapo-gu from the 63 Observatory in Yeouido, Seoul. Photo by Hyunmin Kim kimhyun81@

The government and ruling party hold the view that establishing an independent oversight organization will enable more efficient responses to illegal activities and speculation. Until now, even when illegal cases were detected, the Response Team had difficulty responding independently and had to transfer cases to the National Tax Service or local governments, among other limitations.

In fact, the government is already tightening its grip on market response and crackdowns. Hong Nam-ki, Deputy Prime Minister and Minister of Strategy and Finance, stated at the meeting held that day, "For the overheated areas of the metropolitan area and Sejong, we plan to further strengthen the inspection and response capabilities of the Police Agency's '100-Day Special Crackdown,' which has been ongoing since the 7th, and the National Tax Service's 'Real Estate Transaction Tax Evasion Response Task Force.'

On the other hand, concerns persist in the market that excessive regulation could cause other side effects. Since related agencies such as the Ministry of Land, Infrastructure and Transport, National Tax Service, and Financial Supervisory Service already thoroughly scrutinize illegal transactions, tax evasion, and unclear sources of funds, there is a risk that the new organization might duplicate roles.

In particular, there are claims that state intervention in a specific private market essentially means abandoning the market economy. Lee Eun-hyung, Senior Researcher at the Korea Construction Policy Institute, said, "State intervention and oversight in specific areas are necessary when social harm from the issue is clear and the market cannot self-correct," adding, "There is insufficient reason to establish a separate oversight organization domestically at this time."

An academic source who requested anonymity also pointed out, "It is rare to find precedents where a specific real estate market is singled out for oversight and monitoring organizations in a market economy," and criticized, "The government's move appears to be intended more to instill fear in the market rather than to achieve actual effectiveness."

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