Government policy vs. the Market - who wins?
Here's how the South Korean government tried to halt real estate appreciation... A new Administration came into power in February 2003. I guess they noticed the global land rush in full swing so they imposed higher property and transfer taxes to dissuade speculation. What happens? Real estate values, especially in the popular parts of capital city Seoul rose 40-70% over the past four years, contrary to the policy's objectives. Apparently builders stopped building - from 530,000 apartments to 330,000 apartments between 2002 and 2006 - and in particular, they stopped building in the popular urban areas. Naturally, market forces took over.
Here's the rub: in his New Year's Address President Roh Moo-hyun pledged to contain rising real estate prices by... tadum... further strengthening government policies. So what will they do next?
To put this into political perspective: can you imagine Dubya, in a State of the Union address of say, 2005, proposing property tax increases to quell irrational exuberance in the real estate market?
Technorati Tags: real estate policy, South Korea,
The bubbleheads, recognizing that the 1997 capital gains exclusion may have resulted in a paradigm shift in the relative investment value of real estate, are campaigning for its repeal. If the "inevitable" crash won't happen on its own, we'll make it happen...
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Good point Greg... similar to the proponents of the mortgage interest tax deduction repeal... funny to say we can be relieved that the US government can't act as autocratically as our Asian counterparts, particularly in this two-party system now in place.
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