Oh Se-hoon warns record budget will pour 'fuel on the fire' of real estate market

Seoul Mayor Oh Se-hoon warned Friday that the government's proposed budget for next year is out of step with economic reality and will likely drive up real estate prices.

Oh posted a message on his SNS account Friday under the title "A record-breaking expansionary budget — have we given up on the real estate market?"

"The government has drawn up next year's budget at a record 821 trillion won ($604 billion), a 'hyper-expansionary' spending plan that is a whopping 93 trillion won more than this year," he wrote. "Yet national debt is on track to grow by 106 trillion won in a single year, surpassing 1,500 trillion won." He added that rather than using increased tax revenue to pay down debt and ease the burden on future generations, the government planned to pump even more money into the economy by taking on additional borrowing.

"Is this really the right choice given the state of our economy?" he asked.

Oh said he had been warning since last year that aggressive fiscal expansion amid high inflation and high interest rates could reignite price pressures and boomerang into the real estate market. "Money released through expansionary fiscal policy will not stay where the government wants it," he said, adding that increased liquidity inevitably affects both prices and asset markets.

He said Seoul in particular faces a situation where housing supply cannot meet demand in the short term, while expectations of further price increases are growing. "This amounts to the government pouring fuel — in the form of liquidity — onto the smoldering embers of the real estate market," he said.

Oh said he could not help but suspect that the government, seeing signs of failure in its real estate policy, was trying to prop up the economy through fiscal spending to appease public sentiment. "If policies continue where one hand tightens the tap while the other pours water, ordinary citizens will once again bear the full brunt of that pain," he said.

He said rising prices, heavier housing costs and prolonged interest rate burdens would only deepen the financial strain on low-income households, the self-employed and those without homes. "The National Assembly must scrutinize next year's budget more rigorously than ever," he said. "Populist and consumption-driven spending must be boldly cut, and unnecessary expenditures reduced, so that national debt can be brought under control."