The “Borrow to Buy” Policy and Its Aftermath

Choi Kyung-hwan, who spearheaded economic policy during the Park Geun-hye administration, recalled advising potential homebuyers in 2014 that they could afford a home by securing a loan for the remaining 30% of the purchase price, given that housing prices were already at 70% of their peak. This approach, later dubbed “borrow to buy,” aimed to address concerns about “house poor” individuals burdened by mortgage payments.

He noted that those who acted on this advice in 2015 are now “living without worrying about their homes,” and frequently express their thanks. He emphasized that he didn’t explicitly use the phrase “borrow to buy,” but that the outcome for those who purchased at the time was positive.

Blaming Regulations for Rising Housing Prices

Choi Kyung-hwan attributed recent increases in Seoul’s housing prices to government regulations, arguing that successive left-leaning administrations consistently implement policies based on ideological principles rather than market-friendly approaches. He believes the market anticipates these regulatory measures and reacts accordingly, driving prices upward.

He specifically cited the 26 instances of property regulations implemented during the Moon Jae-in administration, stating that an “overly ideological approach to regulation” will inevitably fail to control the market. He further criticized current government policies, including strict loan regulations and land transaction permits, for their ineffectiveness in curbing price increases.

The “Choinomics” Legacy

The economic policies implemented during Choi Kyung-hwan’s tenure, often referred to as “Choinomics,” involved easing regulations and lowering interest rates to stimulate the housing market. This was a response to the economic downturn following the 2008 Lehman Brothers crisis, when Seoul apartment prices had fallen to 70% of their previous high.

Ideological Divide and Market Response

Choi Kyung-hwan argued that left-leaning governments tend to prioritize wealth redistribution through taxation and regulation, which the market anticipates, leading to increased housing prices. He believes this cycle of regulation and price increases is predictable and unavoidable without a shift in policy approach.

FAQ

• What was Choi Kyung-hwan’s role in the 2015 housing market? He was the Deputy Prime Minister and Minister of Finance and encouraged potential homebuyers to consider purchasing property with loans.
• What is “Choinomics”? It refers to the economic policies implemented during Choi Kyung-hwan’s tenure, characterized by deregulation and lower interest rates.
• What does Choi Kyung-hwan believe is the cause of rising housing prices? He attributes it to government regulations driven by ideological principles.