“The so-called ‘house poor policy’ of the Park Geun-hye government can’t be a remedy by any means because it’s about making up for the loss of major builders and financial companies that have been engaged in predatory lending by means of the debts of young, prospective home buyers,” said Sun Dae-in.
Mr. Sun, head of the economic research institute of the same name and also known as SDInomics, lashed out at the government’s housing market policy announced on April 1. “The policy package reflects only the demands of the interest groups in the construction industry and the Ministry of Land, Infrastructure and Transport. The policy measures, thrown up amid the ongoing economic recession and real estate market slump, are not just undesirable but also ineffective in terms of economic stimulus,” he said in an interview with BusinessKorea, adding, “The housing market bubble that began to form in the 2000s was caused by excess liquidity, that is, the bubble has been maintained by debts, and the problem is that the liquidity supply is unlikely to increase for a while, with more and more people having to dig deeper in their pockets, which is why I doubt the feasibility of the measures.”
He continued, “The housing market value amounts to 6,500 trillion won as of now and it is a figure way out of the government’s control. Although it is intending to raise 18 trillion won in funds under the name of the National Happiness Fund to save debtors, I’m convinced that it will be of no use at all. The same stopgap measures have been repeated since 2000, driving household liabilities and national debt to over 1,000 trillion won and 470 trillion won, respectively.” The independent economist also criticized the government for the revised supplementary budget it is working. “The supplementary budget can’t solve any problems because it’s designed to just bear the burden of debtors by putting to the fore the Korea Asset Management Corporation and the Korea Housing Finance Corporation.”
With regards to the predatory lending of the banking sector, he remarked, “All of the current systems and regulations concerning credit delinquency and recovery focus only on facilitating creditors’ debt collection. Even though there is no doubt that financial companies have their own responsibility for the moral hazard issue, the entire mechanism is completely in favor of creditors. The financial sector must bear the responsibility for having provided loans thoughtlessly. From now on, though belatedly, the government will have to concentrate more on preventing a further increase in the number of heavily indebted homeowners.
The research institute head also sounded an alarm against the government’s intervention in the real estate market. “A flood of baby boomers are rushing to start their own businesses after retirement, but no less than 40% of them are earning just one million won or less a month. The biggest reason for such petty income is exorbitant rent. There is statistical data that one part-time job disappears each time rent goes up by one million won. In short, the real estate market bubble is devouring jobs for young people.”
Wrapping up the interview with BusinessKorea, he gave some advice regarding the incumbent government’s efforts to legalize the underground economy. “What matters now is how to find new sources for tax revenue. At present, related data and information are supervised separately and thus inefficiently by the authorities concerned, including the National Tax Service, the Korea Financial Intelligent Unit and the Fair Trade Commission.
Research Director Sun Dae-in has a unique career. He worked as a reporter for the major local daily newspaper Donga Ilbo as well as portal site Media Daum before joining the KS Economic Research Institute as its deputy director. He studied public policy at the John F. Kennedy School of Government of Harvard University and returned to Korea to serve as a policy advisor to Seoul City.
Currently leading the Tax Revolution Party he has made various appearances on TV debate programs. He has also made a name for himself as a tax, housing market and public policy expert, writing such books as The Era of the Property Market Collapse is Coming, Free Rider, Tax Revolution, It’s the Economy, Stupid and Dangerous Economics.