[Editorial] LH chief's irresponsible claim of a sharp drop in home prices

At a parliamentary audit on the 12th, Lee Seong-hun, president of Korea Land and Housing Corporation (LH), claimed that home prices were likely to plunge. He also said people would not lose out by waiting to buy a home because the housing market would stabilize. He previously stirred controversy with remarks suggesting that mortgage lending limits should be lowered further; now he has gone so far as to raise the possibility of a sharp fall in home prices. With soaring home prices heightening anxiety among people without homes, it is impossible not to question whether such remarks are appropriate from the head of a public institution responsible for housing supply.
Although there are signs of a correction in some parts of Seoul's real estate market, the market as a whole is far from showing signs of a sharp decline. Seoul apartment prices have risen for 87 consecutive weeks, according to data from the Korea Real Estate Board, breaking the all-time record. Jeonse rents are also continuing to rise, leaving lower-income households without homes increasingly distressed by the day. Lending restrictions have made it harder to buy a home, while concerns about insufficient supply persist. In these circumstances, who would readily believe someone urging them to wait because home prices are about to plunge?
In late August, President Lee Jae-myung also posted on social media that he had mentioned the possibility of a collapse in housing prices and instructed officials to prepare a system for large-scale purchases of public housing in response. Of course, home prices cannot rise forever. Prices could also adjust depending on interest rates and economic conditions. But market stability and a sharp drop in prices are clearly different matters. If, following the president, even the official chiefly responsible for housing supply emphasizes the possibility of a collapse in home prices despite being far removed from reality, confidence in policy could be shaken.
Moreover, he did not even provide sound evidence for the possibility of a sharp decline. The LH chief cited increased supply and rising interest rates, but can those factors alone guarantee a sharp drop? Real estate prices are affected not only by interest rates but also by many other variables, including regional imbalances between supply and demand. It is irresponsible in itself for the head of a public institution to talk of a sharp decline without sufficient analysis.
LH's actual supply performance is poor. This year, the target for construction starts on newly built public housing is 51,783 units. As of October 2, just 13,293 units had been started. That is only 25.7% of the target. It will also take considerable time for those units to be supplied after construction begins. LH is also falling short on its supply of purchased rental housing. As of late August, it had purchased 2,539 units, just 13.8% of its annual target. Isn't supplying the homes people need on time precisely LH's core business?
LH's financial health is another cause for concern. Under the Ministry of Economy and Finance's medium- and long-term financial management plan, LH's debt is projected to rise from 197 trillion won this year to 372 trillion won in 2030. If it cannot address this financial structure, it could lose the momentum to carry out its projects.
To ease anxiety in the housing market, both optimistic forecasts and premature predictions of a collapse should be avoided. The market can stabilize only when people see credible supply plans, the ability to carry them out, and results delivered without a hitch. The point is that strengthening confidence in housing supply matters more than emphasizing the possibility of falling home prices in an attempt to ease the anxiety of people without homes. The government and LH should focus on supply performance and feasible measures.