Housing markets in South Korea are set to be tied to liquidity within the monetary availability.
In 2006, the situation was quite different from what it is now. Housing markets all across the country were booming, and President Roh Moo Hyun decided that putting measures into place that controlled liquidity and thereby created a decline in housing prices was the best way to go. He placed a huge emphasis on making sure that housing prices declined, pledging to "…firmly control liquidity."
Now, the year is 2008 and Roh Moo Hyun is out a presidential-calibre job in a short time, leaving the problem of housing prices to his successor Lee Myung Bak. A big thorn in the side of Roh’s administration, housing prices have placed the quite a bit of pressure on his government. Much of his term in office has been spent trying to find a solution for the problem that has been persistently ferocious in the wake of the sputtering economy that currently appears to have South Korea by the throat.
Kang Man Soo, one of the leading members of a team of economists in South Korea who has taken a very close look at the potential problems within the housing market, believes that if the housing bubble were to burst now, the sheer havoc the event would wreak on the economy would be beyond imagination.
According to Soo, "Real estate problems should be managed primarily by controlling liquidity, with a tax scheme supplementing it."
Is that the approach of the government of South Korea? Maybe.
President Roh did institute a comprehensive property tax two years ago that applied to any households where the home prices were in excess of SKW 600 million (approximately USD 640,000), but according to Soo suggests his overall approach to the land speculation situation was somewhat wrong, meaning that he was not able to follow through on his promise regarding liquidity.
President Elect Lee, on the other hand, has pledged that a primary vehicle for housing price control in his government would indeed be the controlling of loans and loan amounts rather than the imposition of taxes. According to Soo, most of the other nations of the world control housing prices by controlling liquidity, and therefore the new government’s promised policy appears to be more conducive to achieving the desired results.
