[Top Pick 전문가 2022 대전망] Changseok Kwak, CEO of City and Space
Maintain the status quo until parliamentary powers change
Seok-Yeol Yoon Private-led supply effect will be realized after 3 years
Real estate is the biggest topic in the presidential election, which is three months away. City and Space CEO Kwak Chang-seok, who has been analyzing the market for over 20 years, analyzed the real estate promises of candidates Jae-myung Lee and Seok-yeol Yoon in depth from the perspective of a market expert. Candidate Lee Jae-myung, who will further strengthen the Moon Jae-in government’s real estate policy, and Yoon Seok-yeol, who advocated deregulation and strengthening private-led supply. Although the promises of the two are contrasting, since the Democratic Party holds the majority in the National Assembly, no matter who it is, it is expected that house prices will rise in the next three years.
▶ Reporter Seo Ki-yeol
Until the day when everyone buys their own house. Seo Ki-yeol’s house tour, today we’re back with CEO Kwak Chang-seok. Hello.
▷CEO Changseok Kwak
yes hello
▶ Reporter Seo Ki-yeol
It is election season. We are now four months away from the presidential election. As a market expert, I would like you to analyze the real estate promises of major candidates from that perspective.
First of all, in the case of People’s Strength candidate Yoon Seok-yeol, who was recently elected as the presidential candidate, many policies are almost opposite to the current Moon Jae-in administration’s real estate policy. Candidate Yoon’s real estate promises, which part can be evaluated positively?
▷CEO Changseok Kwak
First of all, looking at the overall view, there are many traces of candidate Yoon’s real estate promises that many experts participated in and worried about. I don’t know what will happen in practice, but the current promise can give a relatively high score overall.
Also, the real estate promoted by the current Moon administration was almost completely unilaterally regulated. I’m moving towards deregulation. So now, I’m going to reduce the tax a little more, and I’ll leave it up to the function of the market so that the market can run. Now, in particular, I mentioned things like transfer tax and estate tax.
And now, the private sector will take the lead in supplying housing. This aspect also seems to be a positive sign. In that sense, if the promise is implemented, it will not be immediately, but I think the market can find some stability if it goes to the second half of the government.
▶ Reporter Seo Ki-yeol
i See. And now, like you said, easing regulations on taxation and these areas should be viewed as a little positive because the items previously held by multi-family dwellers can be released into the market, right?
▷CEO Changseok Kwak
Yes, I saw what was said about that part, so I mentioned it as a temporary easing, no matter what it is or what it continues to do. Right now, there are a lot of people who want to sell and go out rather than lock them up and not let them go out.
In terms of the need to open the door for such people to go out, if the heavy taxation on multi-family houses is postponed or the tax rate itself is lowered, it seems that they are thinking about whether a new investment will lead to a speculative boom.
▶ Reporter Seo Ki-yeol
It can be. You can think of it that way.
▷CEO Changseok Kwak
It won’t. Especially for a limited time, the suffering of multi-family dwellers, especially long-term owners, is enormous. Older multi-housing owners who have held for 20 or 30 years have no choice but to donate. But if you give these people a little bit of transfer tax, they’ll give you almost anything cheap.
▷CEO Changseok Kwak
Most of them are negative. Long-term holdings cannot be sold unless they are sold.
▶ Reporter Seo Ki-yeol
Yes. If that’s the case.
▷CEO Changseok Kwak
So I have to open the way out. In that aspect, new investment will occur, and the price will fall first rather than in this area.
▶ Reporter Seo Ki-yeol
Yes. As soon as you open the way out, some items come out and the price drops a bit..
▷CEO Changseok Kwak
One thing that is difficult for investors to find is that once a multi-family house is built, you have to pay a huge amount of acquisition tax. Also, since the property tax is so high, I can’t even dream of becoming a multi-family house just by the acquisition tax and property tax.
So, you have to catch one of them with the escape route open, but if you block them from escaping and detonate a bomb inside, they won’t be able to escape. I can’t run away, I just can’t stay.
▶ Reporter Seo Ki-yeol
Yes. Then there is also a large-scale supply policy, how do you look at that?
▷CEO Changseok Kwak
But both candidates said they would supply 2.5 million units equally to both camps. It seems to be balanced, but the previous governments all said that they would supply millions of units during their candidate days. In general, since he is in power for five years, about 500,000 units are supplied annually, so it is not wrong to say that.
But now it depends on which side will supply the supply, but the public sector led the supply and has already done it for the last 5 years of the Moon administration. It’s not going well. What is more problematic is that the moment the public comes forward and offers cheap supply, it is difficult for the private sector to be compared.
The public can take in the land, but the private sector has to buy it at a fair price. It’s not a competitor. So, for the past 5 years now, the public initiative has led to a decrease in supply, but the Yun Seok-yeol camp says that it will now be led by the private sector.
After I became president, I loosened those regulations, and now it is the de facto upper limit on the sale price of local governments. If you loosen the upper price limit system or take realistic measures such as reconstruction and redevelopment, even if it doesn’t work right now, you will start to see the full-fledged effects after about three years after you come up with and implement these measures. Then, naturally, supply and demand will stabilize and prices will fall.
▶ Reporter Seo Ki-yeol
That’s how you see it. If so, which of the promises of Candidate Yoon are expected to have some negative results?
▷CEO Changseok Kwak
It’s similar to what I just said. Now they say they will supply cost housing. In particular, we are talking about cost housing for young people, and I will do it especially in the station area like this. Now we tried our shift near the station and it all failed. The same goes for this. If you supply cost housing in the same area and supply a normal price next to it, would you like to have a normal price because anyone wants to buy a cost house? I’m going to try to make a cost house somehow. That said, it leads to a blockage of the supply of affordable housing.
So, cost housing seems to be good because it promises to be cheap, but in reality, the moment you buy cost housing, it becomes a burden on young people.
▷CEO Changseok Kwak
So, in general, the cost of housing is 300,000 units. This doesn’t look very good from my point of view.
▶ Reporter Seo Ki-yeol
Rather, as in the current Moon Jae-in administration, slightly public-led supply may lead to a situation where this kind of public-led supply can distort the market. I should look at it like this.
In the case of Democratic Party candidate Lee Jae-myung, he declared major real estate reforms. So, in fact, there are several real estate promises by Candidate Lee.
▷CEO Changseok Kwak
Now, it is a major reform, but I think it is a direction to strengthen the keynote that the Moon administration has been working on. I am now personally opposed to the Moon administration’s policy, and I am against it from the beginning.
However, the only thing that can be evaluated in a positive way is that financial regulations will be eased for end users anyway. I think this can be evaluated in a positive way. In addition to that, it seems that they are talking about the tax deferral system right now, but now the tax has suddenly increased too much. Realistically, I think the tax deferral system is necessary.
▶ Reporter Seo Ki-yeol
End-user, so I think we talked about one house per household. You are referring to the parts that Lee said as a single householder, does not need to acknowledge to some extent that house prices have risen.
▷CEO Changseok Kwak
Yes.
▶ Reporter Seo Ki-yeol
Yes, I understand. Then, in fact, from a standpoint who opposed the real estate policy of the Moon Jae-in government from the beginning, Lee’s real estate policy seems to have a lot to say.
▷CEO Changseok Kwak
Overall, the Moon administration has been doing that. It has continued to deteriorate, but now the transfer tax is said to be strengthened. Also, the current ownership tax, such as the estate tax or property tax, is going to go into the land ownership tax. If you own a house or land, the effective tax rate will be raised to 1%.
The current effective tax rate will be around 0.2%. So, we’re going to raise it by about a factor of five or so, but that’s a huge tax bomb. If this happens, it will be difficult to hold and sell. I say this, but in my view, the holding tax is tens of millions of won and the transfer tax is hundreds of millions of won. In the end, I still can’t sell it. In the end, if you end up paying too much property tax, it’s a structure in which the heavy property tax will eventually be passed on to lessee tenants. So it could eventually lead to a rise in monthly rent.
But where does the finances come from for the basic housing, which receives 600,000 won a month rent because of the basic housing? After all, it’s a tax. In addition to paying a lot of taxes, the private sector must see the private supply market as being completely destroyed. Then in the long run, I think you will have a bigger misfortune.
▶ Reporter Seo Ki-yeol
But in the end, if public initiative continues, the market will inevitably become more distorted.
▷CEO Changseok Kwak
As I always say, public-led provisioning has never been successful. That’s what you do in a communist country, and you can’t succeed in public initiative in this capitalist country. The moment public initiative succeeds, it all goes bankrupt.
▶ Reporter Seo Ki-yeol
Yes. And if that happens, I think that the direction of house prices will vary considerably depending on who gets elected and who becomes president. How are you forecasting now?
▷CEO Changseok Kwak
We also use expressions like ‘Moon Jae-in’s spicy taste’. So, if you put a stronger regulation, like our springs, if you press harder, it will bounce harder.
There is a high possibility that it is spicy now, so if you go to a stronger regulation, if there is anything that might happen, it may even ban the transaction itself. For example, if the housing transaction permit system is implemented, it is the same as preventing housing transactions at all. Then the price won’t go up. Because there is no transaction, it is not easy if it is not like that.
And depending on who you are now, I don’t think there will be much difference in the beginning. After all, since the Democratic Party already has nearly 180 seats in the National Assembly, it will not be easy to amend the law related to real estate even if Yoon Seok-yeol becomes president. The first part flows now and we’ll go together eventually.
In the second half, if the supply of masks increases a lot, house prices will go in a direction that stabilizes. If not, it will continue to rise. In the end, the end of the housing price rise is not due to supply and demand factors, but rather to the fact that the economy is more likely to end when a crisis comes. Then it could be unfortunate.
So anyway, in order for the people to achieve this housing welfare and enjoy happiness through housing, they have to go to the construction of a lot. It also has to be built by the private sector. Public sector builds 10%, but the private sector supplies 90%. So it is right to go private-led.
▶ Reporter Seo Ki-yeol
Then, if Candidate Jae-myung Lee is elected, the regulations will be strengthened, and house prices have risen a lot now.
▷CEO Changseok Kwak
I see it going higher. Since it is more tied up than it is now, if the market function is alive, it will go up even more. Then, in my view, the market function will be eliminated altogether, which is what prevents trading now.
▶ Reporter Seo Ki-yeol
Then, do you think that if Yoon Seok-yeol becomes Candidate Seok-Yeol Yoon, there will be some relief, and if the market runs more smoothly, house prices will fall?
▷CEO Changseok Kwak
In the long run, it goes down. Maybe it will turn to a downward trend after about three years in power. Personally…
▶ Reporter Seo Ki-yeol
If it is combined with the 3rd new town that was previously being prepared, or something like this, from then on…
▷CEO Changseok Kwak
The 3rd new city is not progressing much right now. Well, I think that stabilizing house prices by the 3rd new town has nothing to do with the next candidates taking office.
▶ Reporter Seo Ki-yeol
Now, I will have to look at these real estate promises and vote. like this..
▷CEO Changseok Kwak
Yes. So, everyone’s point of view will be different. Anyway, they may want to pay the house price, and I want to run away. i want to get away Could you please let me go a little bit like this?
▶ Reporter Seo Ki-yeol
Thank you very much today.
plan Home Economy TV general Seong-Geun Cho, Digital Live Manager Progress Reporter Seo Gi-yeol
filming Kim Yun-Hwa PD edit Jung Joon-young PD produce Korea Economic Daily, Hankyung.com, Hankyung Digital Lab
