[Column] Deputy Prime Minister of Economy's 'House Price False Hope'

[Asia Economy Reporter Lee Chun-hee] "At a level of 0.02%, it is virtually at a standstill."

This was the housing market diagnosis by Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki, who appeared before the National Assembly's Planning and Finance Committee on the 20th. It reflects confidence that the government's successive real estate measures on June 17, July 10, and August 4 are showing effects in the market.

In response to a question from Rep. Ko Yong-jin of the Democratic Party of Korea about the decrease in gap investments, Deputy Prime Minister Hong added statistics showing that the number of home purchases by people in their 30s declined after the July 10 measures, evaluating that real estate "panic buying" has significantly calmed down. He also praised the sharp decline in panic buying, citing the expansion of special supply for first-time homebuyers and the relaxation of income requirements for newlyweds' special supply.

However, the market criticizes this as "excessive optimism." According to data released by the Korea Real Estate Board on the same day, the number of apartment purchases in Seoul by people in their 30s actually increased from 3,601 to 5,345 last month. The proportion of total transactions also expanded from 32.4% to 33.4%.

There is something Deputy Prime Minister Hong overlooked. Due to soaring apartment prices, many young people have turned to purchasing relatively affordable multi-family and row houses. The number of multi-family and row house sales in Seoul, which had been below 5,000 until May, surged to 7,008 in July, marking the highest level in over 12 years since April 2008.

Deputy Prime Minister for Economy Hong Nam-ki is responding to questions at the plenary meeting of the National Assembly's Planning and Finance Committee on the 20th.
[Image source=Yonhap News]

Although the government relaxed the income criteria for newlyweds' special supply, most young people agree that unless they are "gold spoon" families, owning a home through subscription is just a dream. This is because 75% of the total supply is priority supply, which cannot be applied for if the dual-income household's monthly income exceeds 7.47 million won. Since it is difficult to secure a home through subscription, many are desperately pooling all their resources to buy a row house if an apartment is unattainable.

The government is fueling market anxiety by flooding policies without an accurate diagnosis of market conditions. In this situation, it does not seem appropriate for the economic chief overseeing real estate policy to judge the market as stabilized just because the weekly house price increase rate has slightly decreased. The market's reaction is that it is absurd to talk about stability after prices have already risen significantly.

When the housing market temporarily froze in the first half of last year due to the September 13, 2018 measures, the government was busy self-praising. However, house prices rose again in the second half of last year without fail. The more prematurely the government pops the champagne, the more violently the market reacts. What is urgently needed now is deep policy reflection rather than rash remarks.

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