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How Seoul's skyrocketing housing prices have defied 22 rounds of regulations Updated: 2020-07-22 05:41:08 KST

The South Korean government has introduced 22 rounds of measures to keep the property bubble under control and 22 times, housing prices have continued to climb in Seoul.
Capital-gains taxes on properties resold after less than a year will surge from 40 percent to 70 percent. Multiple home owners will also face taxes as high as 6% in speculative areas, up from 0.6 to 3.2 percent.
But this plan, coming less than a month after the previous set of measures has been met by a wave of criticism that it's a huge misstep that could backfire on people who aren't property speculators, especially as most South Koreans pour their lifelong savings into the property market.
Today, we discuss Seoul's unique property market and why this housing bubble is spiraling out of control.
We are joined by Yang Jun-sok, Professor of Economics at the Catholic University of Korea and Daniel Yoo, Head of Global Investment at Yuanta Securities.

Dr. Yang: Why are housing prices in Seoul continuing to shoot up even during this economic downturn and COVID-19?

Mr. Yoo: Would you agree? It's a rather odd phenomenon that's perhaps unique to Seoul. Compared to the U.S. and Japan where households invest around 30 percent of their finances in the property market, South Koreans invest around 80 percent. Why? Why are housing prices continue to soar?

Dr. Yang: It’s clear there’s a misalignment between the market and real estate regulations. How has the government been misreading the market? Why is supply so important?

Dr. Yoo: What do you make of its latest policy to tax multiple property owners up to 6%? What are they intending to achieve and will it really be effective in curbing speculation?

Dr. Yang: There are concerns that simply hiking taxes will backfire on those who weren't even speculating and will drive up market prices. Do you agree?

Dr. Yoo: The latest plan came less than a month after the previous one there was even talk of opening up Seoul's greenbelt which President Moon now says the government won't pursue. This seems to be confusing the market and worrying a lot of homeowners. How should the government change its approach?

Dr. Yang: Is it even a good idea to try and regulate the property market ? How do other governments handle massive property bubbles? Like what happened in the U.S. over a decade ago.

Dr. Yang: Some say other countries may follow South Korea's aggressive crackdown on the property market. Is that likely?

Dr. Yoo: For the time being, do you think property prices will continue to spike in the capital area?

We'll have to wrap up the discussion here. Yang Jun-sok, Professor of Economics at the Catholic University of Korea and Daniel Yoo, Head of Global Investment at Yuanta Securities. Thank you for your insights

Reporter : osy@arirang.com
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