firmly in place has been confirmed through an abundance of historical evidence.
Possible Contraction in Real Estate Transactions
The recent participatory government is putting spurs to stable housing prices, thus its real estate policy is called a war against real estate prices. However, it is worrisome that recognition of both the government and the general public on real estate prices is highly relying on a small amount of transaction data or asked prices-centered current price information.
Any real estate transaction prices not based on the transaction volume are nothing but simple current prices or asked prices. In particular, evaluating the whole market by only a small part of the whole transaction data is highly risky. The weekly price analyses the government has referred to for years for its housing policies only call for symptomatic treatment, which ultimately mislead the long-term perspective.
Things get worse when it comes to apartment transactions in Gangnam area, one of the key concerns of the government. According to Doctor Apart's land transaction analysis based on government statistics, the apartment transactions in Gangnam area (Gangnam, Seocho, Songpa and Gangdong district) were cut in half from 64,354 in 2003 to 43,530 in 2004 and to 35,109 in 2005. This is believed to result from designation of housing speculation areas, introduction of housing transaction report system, and development profit redemption in case of housing re-development. In Gangnam district, especially, the transactions dropped by as high as 42.2% to 4,525 in 2005 from the previous year, which accounts for only 4.5% of all apartments in the district of 100,000 houses. This means the transactions are less than 100 on a weekly basis, and less than 10 per complex. This figure will be even less in major complexes that the general public and government are interested in. In fact, the reported transactions in Gangnam district (Over 18 pyeong in apartment unit size) rapidly dropped to 876 in March and 478 in April while the apartment prices increased by 3.7%. Instead of higher prices bringing less purchases and resultant lower prices, the current trend is that lower transactions bring up the prices.
The method to survey housing prices is problematic too. Private housing research institutes tend to produce asked prices-oriented price index referring to market prices, during which they highly depend on real estate brokers' price expectation. Since even housing price surveys by Kookmin Bank, the most reliable institute by both the government and citizens, are largely based on brokers' expectation when there is no applicable transaction prices, it is doubtful if objective price index for short period with a few transactions (monthly or weekly) can be produced. More recently, some apartment complexes engage in "mark-up asking prices of apartments" campaign, and brokers are highly pressed for higher prices, indicating the necessity for objective housing price data.
Given above, the government's housing policies should be established not by short-term but by long-term indicators considering full transaction data. Moreover, since the government rules that real estate's real transaction price should be reported commencing 2006, it is desirable to catch up with changes in the housing market, focusing on the reported market prices and transaction volume, to properly execute the policies. In fact, one of the easiest ways to win the war against the housing prices is prohibiting all transactions or limiting newly-built apartments. The government's policies so far seem to follow the direction while bringing up not only property taxes but also capital gain taxes, with transactions highly contracted. The increase in unoccupied new apartments in the metropolitan area, however, indicates how it is critical for the stable housing market to facilitate chain migration of households. In this respect, stable housing prices should be supported by active transactions, and to this end, more resolute and comprehensive policies should be introduced and implemented.
Cho Joo-hyun (Dean of Graduate School of Real Estate Studies, Konkuk University)