The ruling Democratic Party of Korea proposed a bill to punish real estate service providers and houseowners for rigging market prices.
The bill also calls for the establishment of a new agency to scrutinize transactions. The agency will have the authority to look into loan accounts of financial institutions on real estate transactions if buyers and sellers are suspected of fixing market prices in designated regions. It can examine the flow of related funds and tax payment data kept by the National Tax Service. It can investigate alleged acts of disturbing the real estate market and refer inquiry results to the police and tax authorities for further investigation. In a nutshell, the new organ will play a cop role in the real estate market.
It is noteworthy that the bill penalizes market-disturbing behavior as criminal offenses with three years or less in prison or a fine of 30 million won ($27,000) or less. The penalty will be slapped on homeowners who offer “false” asking prices markedly different from market prices when they put their houses on sale through real estate agents or when they induce others to rig prices.
As an example of behavior to be penalized, the bill cited an online community of apartment residents. If an apartment resident posts on an online bulletin board a sentence like “let’s not offer the asking prices below this amount,” the resident would be subject to criminal punishment. YouTubers are no exception from the penalty.
The party has completed its consultation with the Ministry of Land, Infrastructure and Transport over the bill and plans to pass it within this year. The Democratic Party has an overwhelming majority in the parliament.
The pretext for the bill is to stabilize the real estate market, but the means it has chosen go too far.
It is questionable if the bill agrees with a policy of a country that espouses a market economy. The government and the ruling party argue that when it comes to real estate transactions, few regulations punish “false asking prices,” “bogus transactions” and “dissemination of false information” But the common sense of real estate policies is that the government intervenes in the market by adjusting property holding and transaction tax rates and the loan ceiling.
Apartment unit owners must not conspire to raise their housing prices. And yet it is wrong and authoritarian to deem private online posts as price-fixing and punish internet commentators. This is close to suppressing freedom of expression. The bill appears to treat homeowners as potential criminals and seek to punish them even for discussing asking prices among themselves. The government and the ruling party will find it difficult to avoid criticism that they have drawn up the regulations to scare people in a bid to curb housing and rental prices.
Their consistent push to tighten supervision and control shows that they do not try to find the cause of skyrocketing housing prices in the mechanism of supply and demand but that they blame the problem on speculative investors whom they finger as culprits for disturbing the market.
The administration under President Moon Jae-in has been preoccupied with a “war against real estate speculators.” Trapped in that frame, it has announced real estate measures on 23 occasions, but all of them failed to work. It did not listen to experts’ advice that it should increase supply through redevelopment and reconstruction in Seoul where many people want to live. Instead, it suppressed demand harder through heavier taxes and stricter loan restrictions. The more it did so, however, the higher housing prices rose. And the supply of rental housing dropped sharply.
Still, the government and the ruling party do not admit that their policies failed and then they went so far as to propose punishment regulations hard to imagine in free-market economies and liberal democracies. They seem to be the only ones who believe the ongoing turbulence in the real estate market is caused by the shortage of control and punishment.