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[Asia Economy Reporter Jo Gang-wook] ‘Sharp Rise in Officially Announced Prices, Policy Failure D?j? Vu?’

This year, the officially announced prices of apartments and other multi-family housing surged by 19.08%, raising concerns that the government’s real estate policy might be repeating the policy failures of the past Roh Moo-hyun administration. Just as the officially announced prices sharply increased during the last two years of the Roh administration, the current government is also showing a similar trend with housing prices rising more steeply in the latter half of its term. Unlike the Roh administration, which managed to calm housing prices at the end through the supply of second-phase new towns in the Seoul metropolitan area, the current government is facing greater risks of policy failure as even its belated supply measures are faltering due to the speculation scandal involving employees of the Korea Land and Housing Corporation (LH).

According to the Ministry of Land, Infrastructure and Transport on the 18th, this year’s officially announced prices for multi-family housing recorded the largest increase since the inauguration of the Moon Jae-in administration. Although the rate of increase gradually grew since 2018, it remained in the 5% range for three years until last year. However, this year it jumped to 19.08%, expanding sharply within a single year. This pattern is similar to the latter part of the Roh administration. The average increase rates of officially announced prices in 2006 and 2007 were 16.2% and 22.7%, respectively. Both administrations, which implemented the strongest regulatory measures in history, saw housing prices rise more steeply as their terms progressed.

The policy tools used to curb housing prices were also similar. The Roh administration declared a ‘war on Gangnam housing prices’ upon its inauguration and introduced measures to raise taxes on housing ownership and transactions. It imposed heavier capital gains taxes on multi-homeowners and established the comprehensive real estate holding tax. The current government has also focused most of its 25 policy measures on strengthening ownership and transaction taxes.

The market particularly anticipates that the current government’s policies may result in even greater failure. The Roh administration managed to ease the housing price surge at the end through large-scale supply of second-phase new towns. In fact, the officially announced price increase rate in 2008, reflecting housing prices in the last year of the Roh administration, sharply dropped to 2.4%, and in the following year it fell by 4.6%, turning negative. In contrast, following the LH scandal earlier this month, the current government’s ambitious 2·4 supply plan to provide 830,000 housing units has lost momentum within just over a month and is faltering. The LH scandal is even threatening the political base of the ruling party, reshaping the electoral landscape in the Seoul and Busan mayoral by-elections.

Kwon Young-jun, co-representative of the Citizens’ Coalition for Economic Justice, pointed out, “The Moon Jae-in administration’s real estate policy has made life very difficult for the people over the past four years,” adding, “Pressuring the majority of citizens with taxes to the point where they can no longer live in their homes is a failure of the government.”

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