Tuesday, June 14, 2005

Real Estate Jackpot Sweeping Across the Town

It's no good to go against the power of free trade/market.

If gov't tries to do something that goes against the way the free market goes, it's probably going to be unsuccessful. It may seem successful initially, but eventually, it will fail. It's happened numorous times in the history of mankind. One may say it's everything we learn in Economics class as well, at least if we've taken the course in U.S. or Canada. (I guess other more socialist countries may have different views and teaching... I don't know.. )

Yeah, yeah, in Economics, we make so many assumptions, the "rule" has to work. That reasoning is somewhat true. But then, when we do actually learn Economcis, it all seem to make sense.

Anyways.... What's happening with some real estate markets here is very interesting. There are some areas where real estate business has been going nuts. In other words, price of housing has gone up rapidly. It's like you gain 10-20% within a matter of few weeks. But then, when I think about it, it's happened all the time. 20 years ago, 10 years ago, 5 years ago, now...

The gov't tries to settle down the market by ... I don't know what they do exactly, but they implement some policies that will prevent people from buying and selling real estate in some areas that's gone nuts the most. Guess what happens next? People go to the area next to it and do the trading there. Those areas are going nuts. Same thing happening just across the street.

If the gov't really want to prevent people from doing "speculative" real estate trading, maybe they should implement and reinforce more strict taxation as well as much higher interest, say raise the long term interest by 5% or something.. By doing that, people won't be able to buy real estate with borrowed money. But then, they can't raise the interest 'cause they think Korean economy is quite screwed right now. Higher interest will screw up the economy even more.

Anyways. It's an infinite loop of madness. They may want to leave the market as it is, but they have to do something. After all, they get paid to do what they do. They can't just sit there and do nothing, even though it's the best way. People simply won't accept it.

However, I think the gov't should just let things happen. Just ignore the people who accuse you of doing nothing. :-) If someone turns 100%, 200%, 1000% profit within a year or whatever, fine. If the price of housing has gone up very high in some areas, so be it. Just make sure living or keeping a real estate in those areas costs like hell as well. (i.e. make people pay 5-10% of their real estate's current value every year as their real estate tax) That way, only the richest of the richest will be able to afford to live in those areas and "not quite the richest" people won't be able to fuck around with real estate. Those who can't afford will look for somewhere else to live. I mean, we can't all live in the fanciest and nicest parts of the city, just like not everybody can afford to live in Downtown-Midtown Manhattan or the nicest part of London. And if they think bubble's building up, let it happen. It may pop someday and let someone get fucked big time. People will learn the lesson hard ways. Just let it be, like in equity trading. . (It seems like people get screwed a lot in equity trading, but not quite a lot in real estate market... Maybe that's why people here are screwing around with real estate market a lot here.)

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