While the government is set to unveil measures to curb spiraling apartment prices in the coming weeks, the issue of officials’ private interests during decision-making procedures has been at the center of public attention.
Citizens question neutrality and fairness as well as the efficacy of the coming anti-speculation measures. They cite the recent data on some high-ranking officials’ property holdings in the affluent Gangnam district in Seoul.
The district that includes the Gangnam, Seocho and Songpa wards is one of the few areas nationwide to have posted extraordinary spikes in apartment prices on the back of expectations for reconstruction over the past two years.
The data showed that 15 out of the 30 first-tier officials, who have the authority of mapping out and endorsing the measures, were real estate holders in the district. They were officials at the Ministry of Finance, Financial Services Commission, National Tax Service and Ministry of Land, Infrastructure and Transport.
It is unfair to criticize them if their simple purchase of property in the district is just for the purpose of residence.
Yet, the ministry officials cannot be free from many citizens’ feeling that the coming measures will not eventually deal a blow to Gangnam apartment prices, despite possibly slight drops in the short-term. Their skepticism is convincing when past cases are reviewed.
While other areas of Seoul and the provincial cities saw housing prices nose-dive, the Gangnam district was often an exception during overall real estate contractions. And the allegation was raised over the possibility that some policymakers had shunned conducting remedies in their measures to cool off Gangnam property prices.
Most ordinary Seoulites cannot afford to buy apartments in the wealthy wards. Since 2014, when the government started to drastically ease mortgage rules, many of them have purchased residences outside Gangnam or in cities in Gyeonggi Province after applying for loans amid the low-rate era. They hold the risks of a bubble burst amid normalization of mortgage rules and symptoms of loan rate hikes of commercial banks. The situation is the same in provincial cities.
So the key concern is polarization among regions. While the ideal policy is to induce a simultaneous soft-landing in both Gangnam and others’ prices, an undesirable scenario is to face a hard-landing in ordinary areas and negligible effects on Gangnam apartments.
A repetition this time could aggravate ordinary households’ sense of deprivation, should the measures exacerbate the situation and the disparity between Gangnam and non-Gangnam areas widen.
The situation calls for the urgent need for legislation to block conflicts of interest, whereby a law will ban government officials from making private gains during the process of carrying out state projects.
Under this sort of law, 15 of 30 high-profile officials could be excluded from the decision-making group. And the remaining 15 officials’ residential districts, such as Sejong City, will have to be contemplated before measures are drawn.
The nation has already seen a series of allegations where minister nominees have been implicated in speculative investments in the real estate market. The required legislation remains the task of the 20th National Assembly. It is time to propose a bill on staving off conflicts of interest as soon as possible.
For the upcoming countermeasures, relevant ministry officials should make concerted efforts to raise objectivity in the face of mistrust from the public.
The measures should prioritize gradual curbing in consideration of debt-saddled homeowners, who may face heavier burdens of principal and interest. A hard-landing would constitute a policy failure and have negative impacts on the overall economy from a steep downward curve in apartment transactions. Among other policy failures would also be blocking ways for households trying to buy apartments for residential purposes.
For a soft-landing and stabilization of the property market, the government should generate ways to raise the real contract rates among apartment applicants. Amid the highly competitive lottery method in popular districts, premiums on initial apartment prices will inevitably skyrocket.
