Chapter 398 |
I drove to Sejong City.
Sejong City is a new city built in Chungcheong Province to prevent concentration in the metropolitan area and promote balanced national development. It's the largest new city built outside the metropolitan area, and the original plan was to relocate the administrative capital there. However, this plan was thwarted due to opposition from the opposition party and lawsuits, and it ended up becoming a half-baked administrative capital with only about half of the government ministries relocating.
In any case, agencies directly under the Prime Minister also moved to Sejong City in accordance with government policy. Like other civil servants, the Prime Minister usually worked in Sejong City, except for trips to Seoul for cabinet meetings or National Assembly appearances.
That’s why I was going to Sejong City in person.
Reporters were already waiting in droves right from the main gate. As soon as I got out of the car, camera shutters flashed, and reporters rushed forward, thrusting microphones at me.
“For what reason did you request this meeting?”
“Do you have anything to say about the Korean economy?”
“Is it perhaps to convey the US side’s opinion?”
“Please say a word to the public.”
Anyone watching would think I was appearing at the prosecutor's office for causing a social disturbance.
The media had already put forward various speculations about the purpose of the meeting. None of them were correct, though. As always, isn't it a case of "if not, then oh well"?
I said nothing and walked into the building. Since I had already made an appointment, the staff guided me directly without any particular procedures.
Prime Minister Ryu Jeonghoon greeted me warmly in the reception room.
“You must have had a long journey. Thank you for coming all this way.”
“Not at all. Thank you for taking the time despite your busy schedule.”
He had a friendly and approachable appearance, much like a neighborhood uncle.
In Korea, which has a presidential system, the Prime Minister doesn't have a very strong presence. However, in terms of public recognition, he is undoubtedly the second-in-command of the executive branch.
Being able to have a private meeting like this with such a person must be a great privilege.
Of course, having met the US President, the Chinese President, and the Russian President in succession, I wasn't particularly moved.
Just last week, I had met with President Ronald.
We finished our greetings and sat down. A staff member brought coffee and tea.
“Is this your first time in Sejong City?”
“Yes. The roads are wide, and the buildings are all clean.”
This could be said to be a characteristic of a new city developed according to a plan.
“I saw your speech at President Ronald’s re-election campaign launch. Thanks to you, CEO Kang Jinhoo, the ROK-US relationship has become even stronger. As a citizen, I thank you.”
“Not at all. I do it because I enjoy it.”
Prime Minister Ryu Jeonghoon smiled affably.
“When it was announced that you were coming, CEO Kang Jinhoo, there was a lot of talk here and there. I’m also quite curious.”
“I’ll get to the main point slowly. Before that, I have a few questions about government policy.”
“If it’s something I can answer, I’ll gladly answer anything.”
I asked without feeling burdened.
“The current economic situation doesn’t seem very good. Does the government have any countermeasures?”
In fact, looking at the indicators, the Korean economy is doing reasonably well. Semiconductors, batteries, and electric cars are performing strongly, and the Bank of Korea has raised this year's economic growth forecast from 3 percent to 3.5 percent.
However, unlike the success of advanced industries and large corporations, the economy for ordinary people hasn't improved much. The reason is that the situation in manufacturing and construction, which employ many people, is not very good.
As if he had anticipated a question about the economy, he answered as if he had been waiting.
“The government is also considering stimulus measures for that part. We plan to promote corporate investment through tax cuts on investment and to start large-scale SOC projects early. We also intend to support public housing projects and private redevelopment projects.”
“It’s exactly as announced.”
The construction industry has a very large employment inducement effect. That’s why successive governments have used economic stimulus measures by revitalizing the construction market.
The one who particularly liked this was former President Park Si-hyeong. He practically turned the entire Republic of Korea into a construction site, while diligently lining his own pockets behind the scenes.
The Saejeongchi Party, which was the opposition party at the time, strongly criticized this, and President Heo Changmin publicly declared that he would never become a ‘construction government.’
But looking at what they’re doing now, they have no excuse even if they’re criticized for hypocrisy.
I then threw a completely different question.
“Is there any change in the government’s will to control Seoul housing prices?”
At my question, Prime Minister Ryu Jeonghoon’s expression stiffened slightly. He must be wondering about the intention behind such a sudden question.
It’s no exaggeration to say that the current government is at war with real estate.
It started at the end of the Park Si-hyeong administration. As part of economic stimulus, they eased lending regulations and openly encouraged the public to ‘take out loans to buy houses,’ and housing prices, which had been stable for a while, began to soar.
However, the problem arose after the administration changed.
The Heo Changmin government, contrary to the previous administration, poured out various measures to stabilize housing prices and eradicate speculation: raising the comprehensive real estate tax, reducing capital gains tax benefits, expanding the tax base, recovering redevelopment profits, regulating rental business registration, restricting loans, and so on.
Who would object to preventing real estate speculation and recovering unearned income?
However, actions with good intentions can lead to bad results, and actions with bad intentions can lead to good results.
Somehow, after the government stepped in to control housing prices, Seoul housing prices skyrocketed to an all-time high. It’s safe to say that the real estate policy has completely failed.
There are two main reasons. First, the population concentration in the metropolitan area continues to worsen, and second, supply has decreased due to regulations.
Prime Minister Ryu Jeonghoon slowly nodded.
“Of course. It is the government’s policy not to tolerate real estate speculation.”
“But contrary to the government’s policy, haven’t housing prices already skyrocketed? It’s safe to say that it has now become impossible to save up a salary and buy a house in Seoul, right?”
From the government's perspective, is it better for housing prices to rise or fall?
The answer is the same as for inflation. A gradual rise in line with economic growth is the most ideal.
In fact, while housing prices are rising, many people become happy. First, those who bought houses make a lot of money while sitting still. And as the construction market revitalizes, construction companies also make money, and workers at construction sites also make money. In addition, people in related industries such as real estate agencies, moving companies, material suppliers, interior designers, and furniture sellers also make money. As real estate values increase and transactions become active, government tax revenue also increases.
The problem is that the side effects are not insignificant.
To reiterate, real estate has the characteristic of affecting even those who do not participate in transactions. When housing prices rise, jeonse (lump-sum deposit rental) and monthly rents follow, increasing the housing cost burden for those who have not bought houses.
The biggest problem, above all, is household debt. Coupled with soaring housing prices, real estate loans have exploded. Currently, Korea's household debt is 1,600 trillion won. This is an amount almost equivalent to the GDP and is at a serious level even when compared to OECD countries.
In the end, those who bought houses struggle to repay loans, and those who didn't buy houses struggle to pay housing costs. Naturally, consumption shrinks, and the economy is bound to stagnate.
“Basically, the market moves according to supply and demand. It’s true that the Korean real estate market is overflowing with speculative demand, but there is also plenty of real demand. There will be limits to controlling housing prices when supply is not expanding.”
“That’s why we plan to develop housing sites in Seoul and the metropolitan area and create 3rd generation new cities to supply over 300,000 units.”
The government seriously embarked on new city construction in the 1990s. At that time, the Roh Tae-woo administration decided to build 2 million housing units to solve the problem of soaring housing prices and supply shortages. For this, they created 1st generation new cities, represented by Bundang and Ilsan, and supplied apartments, which barely managed to resolve the housing shortage in the metropolitan area.
However, even after that, the population of the metropolitan area continued to increase, and 2nd generation new cities were built in Pangyo, Gwanggyo, Dongtan, Unjeong, and Wirye.
And this time, as Seoul housing prices soared again, they hastily pulled out the 3rd generation new city card. The plan is to build new cities in Wangsuk, Gyosan, Gyeyang, Changneung, and Daejang to control Seoul housing prices.
“Even if we build 3rd generation new cities, can we really control Seoul housing prices? The real estate market is already buzzing with the thought that all possible measures have already been taken.”
Seoul housing prices, which seemed to be falling due to government measures, are soaring again, and apartments for sale are recording competition rates of hundreds to one.
“Once the 3rd generation new cities are completed, overcrowding in the metropolitan area will become even more severe. And the next government will probably say they’ll build 4th generation new cities.”
Prime Minister Ryu Jeonghoon did not hide his discomfort.
“The government is also doing its best. Then, in your opinion, CEO Kang, what would be a good way to do it?”
He was probably saying, "If you have a better way than this, tell me."
“After the Big One, housing prices in major cities across the US skyrocketed.”
This was because people who lived in San Francisco and Silicon Valley, which had collapsed, migrated. Speculative demand also flocked here, and prices soared by tens of percent in less than a year.
Surprised state governments poured out various countermeasures, but they were insufficient to control the soaring housing prices.
“But starting from the beginning of this year, prices suddenly began to fall sharply. You probably know the reason.”
It was because the reconstruction of San Francisco and Silicon Valley had begun. Even now, hundreds of IT companies are burning with the will to return to their hometowns and are constructing their headquarters. If companies return, the people who work there will also follow. Naturally, housing prices are bound to fall.
“The conclusion is that dispersing demand to other regions is the best way.”
“The government is well aware of that point.”
“So, it’s not that you don’t know, but that you can’t do it.”
Prime Minister Ryu Jeonghoon said with a sigh.
“The purpose of promoting the construction of Sejong City was also to alleviate the concentration in the metropolitan area. As government agencies in Seoul and Gwacheon relocated, the civil servants working there naturally followed. Some civil servants moved with their families, but the reality is that many civil servants still come down to Sejong City alone, work on weekdays, and go up to meet their families in Seoul on weekends.”
In fact, it's so difficult to get tickets for northbound buses and KTX to Seoul on Friday nights and southbound to Sejong City on Sunday nights.
This shows how difficult it is to disperse the population outside the metropolitan area.
“Population concentration in the metropolitan area is a problem for the metropolitan area, but also for other regions. Not to mention rural areas, even metropolitan cities like Busan, Daegu, and Gwangju are experiencing population decline as young people leave for the metropolitan area.”
Young people flock to the metropolitan area in search of jobs, and companies flock to the metropolitan area in search of job seekers. On the other hand, regional areas are experiencing industrial hollowing out and population decline simultaneously. Gunsan, for example, barely caught its breath after an electric vehicle industrial complex was established.
“Previous governments have tried many measures to solve this, but all were ineffective. No, it would be better to see it as being contained to this extent thanks to measures like the construction of Sejong City and regulations on the metropolitan area.”
I nodded as if I understood.
“Then, I’ll ask one last question. According to the announced economic stimulus package, large-scale development plans are also included for Seoul and the metropolitan area. This will inevitably affect Seoul housing prices. Isn’t it a contradiction to try to revitalize the construction market while controlling housing prices?”
“……”
He couldn't easily answer this question.
I slowly got to the main point.
“So, if there’s a good way to stabilize Seoul housing prices and also stimulate the economy, what would you do?”
Prime Minister Ryu Jeonghoon looked surprised but tried to ask calmly.
“Is there really such a way?”
“It’s the Saemangeum new city development.”
As if he hadn't expected it at all, his reaction came a moment later.
“……Saemangeum?”
He is a Prime Minister from the Honam region, and Gimje is his hometown. As such, he would know Saemangeum better than anyone.
That’s why I came to meet him like this.
“Yes. If we build a new city in Saemangeum, the problem of population concentration in the metropolitan area will be resolved, and Seoul housing prices will naturally stabilize. The economy will also improve with large-scale investment and construction. From the government’s perspective, you can kill two birds with one stone.”
I handed him a document that briefly summarized the development plan.
“Would you like to read it?”
Prime Minister Ryu Jeonghoon took out his glasses from his pocket and put them on. Then, after carefully reading to the last page, he asked me.
“What’s different about this from what the government is currently pursuing?”
“You can consider it almost the same. But there is one big difference.”
“What is it?”
I said firmly.
“The government can’t do it, but I can.”
“……”