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(Yonhap Editorial) Hope for revitalization of ailing housing market
SEOUL, April 2 (Yonhap) -- The Park Geun-hye government announced unprecedentedly bold measures on Monday to revitalize the hard frozen real estate market, especially the housing sector, that has been a major stumbling block to the country's economic growth in recent years.

   The stimulus package, Park's first, came out four days after the government revised its earlier economic growth projection of 3 percent to 2.3 percent, citing gloomy market conditions at home and abroad.

   Finance Minister Hyun Oh-seok pointed out in a policy meeting that a prolonged housing market slump could be a burden on the overall macroeconomic situations.

   The country's housing market has been virtually in a moribund state, in which homeowners are reluctant to sell their homes due to diving housing prices, while potential homebuyers postpone purchases, ever deteriorating the housing market especially amid the worldwide economic slump.
For example, housing transactions in Seoul and metropolitan areas recorded a mere 270,000 last year, one third of the transactions made in 2006. The average price of homes nationwide dipped 0.26 percent from a year earlier in January, posting an on-year drop for 10 consecutive months.

   The gist of the new measures, which requires parliamentary approval, is to ease tax and loan regulations particularly for low- and middle-income classes, and curtail supply in a desperate bid to bolster transactions in the comatose housing market.

   First-time homebuyers and newlyweds would be given the exemption of acquisition taxes when they purchase houses that are smaller than 85 square meters or worth less than 600 million won (US$538,000) by the end of this year.

   People who buy a new or unsold house worth under 900 million won will also get an exemption on property sales taxes for five years after the purchase.

   The government will cut the public housing supply to 20,000 units a year from 70,000 in consideration of the oversupplied housing market.
The previous Lee Myung-bak government, which indeed made every effort in vain to revive the stalled real estate market, did not ease regulations on debt-to-income and loan-to-value ratios, which restricted excessive bank loans by homebuyers in fear of snowballing household debts. But the new package would significantly ease the regulations.

   Accordingly, these steps seem to be unavoidable in some ways for the Park government, whose biggest task is to overcome the prolonged economic slump, and are likely to produce some positive outcomes.

   However, the ailing housing market is unlikely to be completely normalized with the package this time alone.

   In fact, the market doldrums stem basically from the sluggish local economy, which has suffered low growth over the past three years. Public concerns over the low economic growth, among other things, can be said to have led to a crisis in the property market.

   Therefore, the government should not focus too much on reviving the real estate market alone and rather will have to make more efforts on reactivating the economy.

   In particular, the government will have to give people hope and confidence that the economy will revive once more. Bi-partisan cooperation is also required for the successful implementation of the package as it requires the revision of related laws.