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The investor frenzy over City Park, a residential and commercial complex to be built in the Yongsan district of central Seoul, took the real estate market by surprise this week.
According to KorAm Bank, the exclusive handler of the application process, City Park set new records both in the number of applicants and the amount of deposits.

From Wednesday to Thursday, 249,538 people applied for 770 residential and office units, with application deposits totaling 6.92 trillion won, about 1 percent of Korea's gross domestic product.

Sharp Star City, a residential and commercial complex in Gwangjin-gu, Seoul, held the previous record for application deposits at 2.52 trillion won. It attracted 84,000 applicants for 1,177 units in May last year.

The winners, who will be chosen by electronic lottery and announced on March 30, must sign the contracts April 1-2.

In the wake of the storm, people are now curious about what made City Park so attractive.

Analysts first blame inconsistent government real estate policy for the phenomenal investor rush.

Following the 1997 currency crisis, the government lifted many regulations to liberalize the real estate market as part of its desperate efforts to save the troubled economy. But the efforts failed to spark the stagnant economy and only created real estate bubbles, they said.

Government officials with agree this opinion.

"We took the stimulus policy toward the real estate market to quickly revive the economy but failed in the end," Construction Minister Kang Dong-suck told reporters recently.

City Park was one example of the policy failure.

The government has decided to reinstate its ban on the resale of purchase rights for residential and commercial complexes beginning March 31. Many people did not want to miss out on a last chance to take advantage of the failed government policy for speculative purposes.

Another main reason for the rush was that there was a huge amount of liquidity on the market to fuel speculative investments.

According to data from the Bank of Korea, the amount of short-term time deposits at major financial institutions with a maturity of less than six months reached 383 trillion won at the end of 2003, which is more than the half the nation's GDP.

"The City Park frenzy was very natural because there was no other better place to invest," said Park Dae-ryong, a senior researcher at Samsung Economic Research Institute. "Such an extraordinary phenomenon could take place anytime again in the future if there comes a similar cir*****stance."

"City Park came right at the time when investors were finding no place for their money," said Kim Yong-jin, head of a real estate firm. "People don't want to put their money in the banks due to low interest rates and are still hesitant to invest in stocks."

Meanwhile, the government is scrambling to dodge rising criticism on its real estate policy.

The Construction Ministry said it would closely monitor and take severe measures against any person who illegally resells the purchase rights for a City Park unit, while the National Tax Service will check on whether people have evaded any taxes in the process of acquiring and reselling the purchase rights.

"If the winners resell their rights, we will check whether they have paid the 55-percent capital gains tax," said Kim Gwang-jeong, an official at the tax agency. "We will levy taxes heavy enough to take away most of the gains from selling the rights."

(saintsim@heraldm.com) By Sim Sung-tae