[이철호의 퍼스펙티브] Real estate disaster caused by lies and misjudgments

President Moon Jae-in instructed the Ministry of Land, Infrastructure and Transport, saying, “The most urgent task is real estate,” and “take the ministries’ good luck in stabilizing housing prices and jeon and monthly rent prices, focusing on the 2·4 real estate measures.” Minister of Land, Infrastructure and Transport Byun Chang-heum pledged to “supply 836,000 units nationwide (320,000 units in Seoul), the highest level ever, by 2025.” However, the real estate market is a hazy look. In a recent poll, 53.1% of respondents said that the 2nd and 4th measures will not help stabilize real estate prices. The public-led development of the station area has not gained trust.

The biggest problem with real estate policy is the loss of trust. In an interview, former Blue House secretary Noh Young-min said, “The President reads the newspaper carefully. I even read internet comments.” If so, you wouldn’t have seen these best comments on real estate articles. “When Banpo Jai jumped to 1.25 billion in Park Geun-hye, he said,’The country is ruined because of real estate,’ and now it is 2.8 billion. It is a country I have never experienced.” In the market, the resistance and learning effect accumulated in the real estate policy of Jae-in Moon. It is an atmosphere that is difficult to work with even with a shocking prescription.

It is true that President Moon’s position on real estate has changed somewhat. In last month’s New Year’s address, there were only three lines, but he expressed regret and said, “I am very sorry to the people.” It is different from a year ago when it was said, “I will never lose the war on real estate speculation.” However, it remains doubtful whether policy failures will be clearly acknowledged and policy changes will be made fundamentally. That indirect evidence came out a week later at a New Year’s press conference. President Moon said, “Even though the population declined last year, a whopping 610,000 households increased.” This is in the same vein as the statement of Democratic Party President Lee Nak-yeon. He said, “It was a huge defeat that the government and the Seoul city failed to properly predict the changes in our society,” he said. If so, is this really correct?

Single-person households are not the main culprit

The proportion of single-person households in the metropolitan area reaches 30%. It is true that it has increased a lot. However, the surge in house prices over the past three years has centered on apartments. In contrast, most of single-person households (69%) live in multi-family, coalition, and multi-family houses. In particular, 38% of single-person households live on a monthly rent with a deposit, 15% live on a cheonsei basis, and only 30.6% have their own home. Moreover, it is difficult for single-person households to dream of purchasing an apartment. This is because the number of dependents is the biggest distribution point among subscription points.

In addition, the “increase of 610,000 households” referred to by the President is based on the statistics of resident registration of the Ministry of Public Administration and Security. Actually, there is a distance from a single person living independently. This is because, as housing subscriptions and tax benefits increase for one household or one homeless person, there have been many cases of separating households according to administrative documents. There are not many imaginary numbers.

Even if the surge in single-person households stimulated real estate, the price of mid- to large-sized apartments for 3-4 people should not have risen. This is because demand cannot increase as the number of households is relatively stagnant. However, the apartment has risen regardless of the balance. Therefore, driving a single household as a real estate culprit is a false diagnosis. It’s a witch hunt to get rid of policy failures and blur focus.

If the diagnosis is wrong, the wrong prescription will come out. The same is the reason why the real estate market does not believe in the Byeon Chang-Humpyo 2 and 4 measures, which is a’breakthrough supply shock’. The public-led development of the station area is far from a 3- to 4-person housing. There is no choice but to focus on small homes for single-person households that don’t have to worry about educating children. This means that the market cannot mass supply high-quality apartments for 3-4 people. This is the fatal limit of the second and fourth measures.

Lies and excessive ideology are the problem

In 2018, the head of the policy department Jang Ha-seong said, “As I live, not everyone needs to live in Gangnam.” Since then, the Gangnam apartments are already rare, so there is no need to worry, and the policy direction has been shifted toward promoting the stability of the common people’s housing by expanding public leases. But it doesn’t make sense. Even in light of long experience, Gangnam apartments are an indicator species in the real estate market. When the price of apartments in Gangnam rises, it has followed the procedure of spreading to Ma (Po), Yong (San), Seong (Dong) → Gangbuk → Metropolitan area → locality. When housing prices soared, jeon and monthly rents also increased with a lag. Therefore, it is an illusion that is biased toward ideology, not economic logic, to settle the nationwide house price and rent while leaving the Gangnam apartment. It is just a political division of’Gangnam apartment = speculator = hostile force’.

Mi-ae Chu and Si-min Yoo promoted Henry George’s real estate socialism. But it is not the time to cling to the old anti-market ideology. The lease law also delayed the’crazy charter’ for two years. Even now, it is important to stabilize the house price in Gangnam. Failure to send strong signals to the market to ease redevelopment and reconstruction will repeat failures. It is important to give confidence that a good home will be adequately supplied at a reasonable price. You can’t fool the market with lies forever.

The real culprit is the misjudgment of the regime

There are three statistics showing why the real estate policy has failed over the past three years. Although apartment prices in Seoul have jumped by 80% and demand for housing has risen tremendously, construction investment has declined. It is a nonsense contradiction. That is a number that shows how severely the housing supply has been contracted due to real estate regulations. Even real estate hearings were not held properly during this period.

According to the Korea Construction Association, the amount of orders for residential construction was 68 trillion won in 2015 → 76 trillion won in 2016, but shrank from 68 trillion won in 2017 to 56 trillion won in 18 and 65 trillion won in 19. It barely reached 70 trillion won in 2020. The same statistics are also found in the number of apartments sold. In 2015, it was 51.7 million households → 435,000 households in 2016, and then 326,000 households in 2017 → 297,000 households in 18 years → 3.34 million households in 19 years. In contrast, the average pre-sale price per pyeong of apartments in Seoul jumped from 18.36 million won in 2015 to 20.7 million won in 2016, 21.1 million won in 2017, 22.87 million won in 18, and 2573 million won in 19.

In short, despite the rise in apartment prices over the past three years, home orders and apartment sales have declined. The Moon Jae-in regime and Seoul Mayor Park Won-soon were erratic, saying, “The housing supply is sufficient.” At the same time, he said, “The speculators and multi-homed people are the problem,” he just swung his tax bat. Demand in the market expands, but even elementary school students know what happens when supply is blocked. In the end, the government’s misjudgment caused a major accident. The problem is that the common people and homeless people bear the damage of the real estate disaster. Deteriorating public sentiment in real estate is the self-profit of the Moon Jae-in regime.

Will the Seoul Mayor’s election become a game changer?

The real estate market is watching the Seoul Mayor’s by-election in April rather than the second and fourth measures. This is because it may be a game changer that changes the real estate game. There are four major ways to supply new apartments in Seoul and the metropolitan area. ① Reconstruction of old apartment complexes ② Redevelopment projects in underdeveloped areas ③ New cities for the 3rd and 4th periods ④ Development of station areas. The Moon Jae-in administration is focusing on ③ and ④ with public initiative. However, it is the order of ① ② ③ that can supply high-quality housing in large quantities quickly. It will proceed quickly only when it is left to the private sector while providing strong incentives such as an increase in floor area ratio.

Currently, the ruling party’s candidates for mayor of Seoul are not significantly different from the real estate policy line of Moon Jae-in and Park Won-soon. On the other hand, the candidates for the power of the people set their direction as’private initiative’. Candidate Chul-soo Ahn is also in the position that “the construction of houses should be basically led by the private sector.” The opposition candidates also have a common point of focusing on the deregulation of reconstruction and redevelopment. Therefore, if the opposition candidate becomes the mayor of Seoul, private-led options ① and ② are likely to be promoted. There is a cataclysm in the real estate market.

Good and bad news in the real estate market

Real estate experts contend that now is not the right time for homeless people to buy a house. This is because, in the face of the heavy transfer tax and the comprehensive real estate tax bomb, there may be sales for tax savings. However, there is another important reason why they shake their heads for a dramatic further increase in house prices in the future.

First, it is that “even if the house price has risen over the past three years, it has risen too”. Second, the opposition candidate is elected mayor of Seoul in April. Third, there is a possibility that the Moon Jae-in regime will be defeated in the election in April or will feel a sense of crisis ahead of the next presidential election, and will change the real estate policy entirely. Towards market-friendly… .

According to Professor Jared Diamond’s “Cataclysm-Crisis, Choice, Change,” the first step to overcoming a national crisis is to recognize the crisis as a crisis as it is. Then, the government must actively accept its responsibilities and have a cold assessment of its abilities. After that, he said that finding a good example was the wise step. The Moon Jae-in regime is also looking to see if it will overcome the real estate crisis on its own.

One real estate expert said that the same good news and bad news are circulating in the real estate market these days. “The good news is that the term of the amateur regime, which has suffered 24 major accidents, has only one year and three months left, and if it is bad news, this experiment can still last for one year and three months.”

Chul-ho Lee Columnist, JoongAng Ilbo