June 09, 2021 12:56
Prices of apartments for sale and rent are soaring as the government refuses to admit four years of blunders in trying to tame property speculation. Any attempts at formulating better policies flounder on fierce opposition from lawmakers and government officials loyal to President Moon Jae-in. Apartment prices in Seoul edged up 0.12 percent in the first week of this month alone, and that is true both in the affluent Gangnam area of southern Seoul as well as small apartments in Nowon and Geumcheon districts in outlying areas, resulting in the average price surpassing W1.1 billion (US$1=W1,115).
Younger people, who can no longer dream of buying homes in Seoul, have flocked to Incheon and surrounding Gyeonggi Province, driving up apartment prices in the entire greater Seoul area by almost seven percent so far this year, the highest increase since 2003. People looking for jeonse or Korean-style deposit lease apartments are having heart attacks as average prices surpassed W610 million for the first time ever. Jeonse prices soared 20 percent less than a year after the ruling Minjoo Party enacted tougher laws to bolster the rights of tenants.
But instead of reflecting on its failure and apologizing, the MP wants to come up with even more regulations of the kind that caused this mess. The party's committee on real estate policies took the bizarre step of proposing to scrap tax incentives for rental business operators. The aim is to force multiple-home owners to sell some of their property, hopefully flooding the market with apartments and causing prices to fall. But 77 percent of properties owned by multiple-home owners is multiplex housing units and small flats that are usually rented out to low-income families and one-person households. The Minjoo Party's latest measures will only squeeze the rental market further and jack up jeonse prices.
The government's blinkered approach to boosting housing supply is facing obstacles left and right. Plans to build apartments on idle land next to the government complex in Gwacheon just south of Seoul were scrapped after stiff opposition from locals, while similar plans for Taeneung in northeastern Seoul, Mapo near the center of the capital and other areas are also facing fierce opposition from nimbys. The government has brought this disaster on its own head. The MP is only interested in wooing voters ahead of next year's presidential election and ignoring the advice of experts to allow private builders to redevelop or renovate older apartment complexes. At this rate, things are only going to get worse.
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