Great changes are taking place in the domestic housing market. Breaking the norm of home transaction prices moving in tandem with "jeonse" prices (a rental fee based on a lump-sum deposit), house prices have been falling while jeonse rents have been rising since 2009. Amid increasing demand for jeonse houses, landlords want to shift to monthly rents. Due to the trend, jeonse tenants whose contracts have expired are suffering from the dual burdens of rising jeonse prices and monthly rents. As the housing supply ration has exceeded 100 percent, addressing the chronic housing supply shortages, the social perception that investing in houses is a sure bet.
However, housing regulations remain obsolete. The government maintains the old system of giving individuals and local residents priority in applying for rights to purchase new apartment houses. The system was adopted when the government aimed at providing each household with a house. Transactions of residential houses are also subject to various price regulations. Owners of multiple homes are levied with heavy taxes. Regulations on house sizes remain intact. As all those regulations were introduced at times of housing supply shortages, they are now anachronistic.
With the transformed real-estate market landscape, the government should draw up long-term plans befitting the changed environment. For now, the government should seek to enact laws reflecting its measure to boost the slumping property market and curb soaring jeonse prices. Twenty-six real-estate organizations have issued a statement urging lawmakers to at least pass the property bills. Legislators should pay attention to their earnest voices.
The government should consider abolishing housing regulations such as the required ratio of small-sized houses and rental homes that are no longer valid. The ceiling on initial sale prices of apartment houses should be removed. The law requiring builders to publicly disclose details of apartment prices should be revised in the way that they are allowed to provide relevant information for home buyers upon signing contracts. Real-estate taxes should be rearranged so that they will be in line with the principles of taxation, rather than being used as means for controlling economic cycles or curbing property speculations.
The shift from jeonse to monthly rents is an unavoidable trend. There is no need for the government to hurriedly abolish the jeonse system. However, it is necessary to soft-land its exit. To lessen financial burdens of those paying monthly rents, the government should increase income tax deductions. The ratio of public rent houses to total supply of houses stands at 4.6 percent, far lower than 10 to 20 percent in advanced economies, which should be drastically increased. Instead of burdens, the government should offer incentives to house leasing businesses to promote the supply of privately built rental houses. Heavy taxes on owners of multiple houses should be abolished urgently as well, while corporate bodies should be allowed to apply for rights to buy new houses. It is absurd that there are no companies specializing in house leases despite the government`s plan to promote rental home market.
The source by Donga Ilbo