But there was no happy ending. Whether it was a homeless tenant or a multi-family homeowner, there was a lot of concern. There were headaches due to the complicated increase in taxes, worries that the landlord would not be able to exercise the right to renew the contract before the expiration of the contract around the world, and sighs that it is getting harder and harder to find a house for a college student daughter because of the dryness of the rent for sale.
When the next government is inaugurated, will these worries go away? We recently met with the economic advisors of candidate Lee Jae-myung and Yoon Seok-yeol, respectively, and asked about the direction of future real estate policy. Lee Jae-myung and Yoon Seok-yeol’s presidential campaign all agreed, “There will be no such worries in the future.” It was an assertion that the Moon Jae-in administration and the next government would be clearly different.
The diagnosis in both camps was the same. The real estate policy of the Moon Jae-in government has failed. Kim Tae-dong, an emeritus professor of economics at Sungkyunkwan University, who is a policy advisor to Lee Jae-myung, blew a direct hit saying, “We have created the world’s worst real estate hell.” Kim Kyung-hwan, a professor of economics at Sogang University, who participated in creating the real estate policy, which is the first pledge of the Yun Seok-yeol camp, declared, “It is necessary to reset (return to the origin) the real estate policy.”
However, the analysis results were different as to why this failed. Lee Jae-myung’s side attributed the failure to ‘excessive demand’. The buds of real estate speculation are showing signs that they haven’t clearly cut it in the first place. Professor Kim Tae-dong pointed out that “the problem is that Kim Soo-hyun, senior social worker, took tepid measures in the early days of the Moon Jae-in administration because he was concerned about the real estate collapse.”
On the other hand, Yoon Seok-yeol’s side saw ‘supply shortage’ as the cause. There are many people’s desires to live in better homes in the metropolitan area, but it is not a good idea to suppress and regulate them rather than satisfy them. Professor Kim Kyung-hwan said, “The biggest protection for tenants is the supply of housing.
Due to the different failure analysis, the real estate policies of the two camps were polar opposites. The most stark contrast is tax policy. The Lee Jae-myung side is expected to raise taxes more clearly and clearly. It is expected that the holding tax (comprehensive real estate tax, property tax) will be strengthened and the speed of realization of the announced price will be increased.
Professor Kim Tae-dong said, “The more the property tax is eased, the more difficult it is to hold the house price because it raises future expectations for house price income. According to the report of Younghoon Yoon, a visiting research fellow at the Korea Institute of Taxation and Finance, the effective rate of real estate holding tax (as of 2018) was 0.16%, which is lower than the average of eight countries (0.54%) in the Organization for Economic Cooperation and Development (OECD).
However, Yoon Seok-yeol’s conclusion is that ‘the house price cannot be set with taxes’. The role of the government is to go all-in to supply housing for the low-income class, the vulnerable class, the youth, and newlyweds. Tax and loan regulations should be loosened and left to the market. Professor Kim Kyung-hwan suggested, “I hope that all real estate taxes (special tax, transfer tax, acquisition tax, and property tax) that have been raised since the inauguration of the Moon Jae-in administration should be returned to their original state.”
House prices are affected by a number of factors, including transportation, education, jobs, infrastructure, interest rates, growth rates, home depreciation, and liquidity. In addition to this, what is important is ‘expectation psychology’. As a result of a Gallup Korea survey in June, the proportion of respondents who said ‘will increase’ for the next one year was 60%, six times the proportion of respondents who said ‘will decrease’ (11%). This poll is a different ‘expectation’ from the Moon Jae-in administration’s prediction that house prices will be caught.
Will this expectation change when the next government takes office in May next year? No matter who wins the presidential election, the primary candidates Lee Jae-myung and Yoon Seok-yeol or the ruling and opposition presidential candidates, real estate policies are expected to change rapidly. As the Moon Jae-in administration’s real estate policy was defined as a failure, it was because it foretold a ‘major operation’ in real estate policy.
Whoever is elected in the future, the key is to make sure that the people can live without worrying about their homes. A policy to stabilize real estate and a policy to improve the living standards of all citizens should be prepared. What is important for this is public trust. When the next president takes office, I expect that he will first seek ways to restore public trust in the government’s real estate policy.
※Every policy has a story. Good policies do not always lead to good results. As well as ‘policy effect’, ‘policy error’ should be viewed in a balanced way. In order to provide a policy that is helpful to the people, we trace and tell the story behind the Sejonggwan family issues and policy discussion process.