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On Thursday the government and ruling Uri Party decided from September to make it mandatory for private construction firms building apartments to disclose their construction costs. Currently, these rules affect only public housing projects. They decided to apply the new regulations only to apartments built in the Seoul metropolitan area and the five major cities - areas deemed real estate speculation zones. For now, builders are required to reveal the costs of only seven out of 60 items involved in those projects, including land. And builders don’t have to reveal the actual amount they paid for the land, but only its value as assessed by an appraisal firm. Finance Minister Kwon O-kyu said the government had carefully considered the potential side effects of the new regulations.
No matter how they try to spin the idea, the bottom line is that now builders will have to reveal the cost of building apartments. The reason the government opposed these regulations in the past is because they go against free market principles. Until late last year, even Minister Kwon himself was against the rule, saying excessive government intervention could lead to a contraction in the housing supply. Construction Minister Lee Yong-sup also pointed out previously that the idea is unreasonable, saying "a net that is too tight is bound to rip". But over the span of less than half a month, both ministers have abandoned those positions. If these economic experts opposed the policy, there must have been good reason for it. They should explain this sudden about-face. Did they feel it was better to follow the president rather than their economic beliefs?
Housing prices are determined by supply and demand. This administration is completely ignoring such principles, believing housing prices will automatically drop if construction costs are revealed to the public. But there is a strong possibility that the policy may cause the construction market to contract, thereby lowering supplies and driving housing prices higher. When that happens, the ones who will be hit hardest are low-income Koreans. As long as this government stubbornly sticks to a skewed real estate policy, the pains suffered by low-income Koreans will only worsen.
(englishnews@chosun.com )
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