Song Seok-jun "July 10 Real Estate Measures May Cause Local Real Estate Slump"

Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki and Minister of Land, Infrastructure and Transport Kim Hyun-mi are leaving the briefing room after announcing a comprehensive real estate plan, including strengthening the comprehensive real estate holding tax for multi-homeowners, at the Government Seoul Office in Jongno-gu, Seoul on the 10th. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Lee Ji-eun] Song Seok-jun, chairman of the Real Estate Special Committee of the United Future Party, expressed concerns that the July 10 real estate measures could suddenly and unexpectedly cause a downturn in local real estate markets.

On the 13th, Song appeared on KBS Radio's 'Kim Kyung-rae's Strongest Current Affairs' and said, "Excessive burdens on multi-homeowners could, contrary to the intended goal, backfire and have a significant negative impact on local real estate markets."

He explained, "We created innovation cities as part of regional balanced development, but if wealthy investors concentrate their investments in a single property in the smart Seoul metropolitan area, and high-income professionals who owned multiple homes each in local areas sell their local properties to focus on the metropolitan area, it could lead to a local real estate slump." He added, "This could cause an unexpected policy side effect where the metropolitan area becomes even more concentrated and prices there rise."

He predicted that multi-homeowners would likely not sell their houses despite the new measures. Song said, "If the holding burden on multi-homeowners increases, one would expect them to sell, but if exchanging their homes for something else is not profitable, they will not sell." He further explained, "Even ordinary homeowners with sufficient means might bear the tax burden and hold onto their properties."

Regarding the July 10 measures, Song stated, "The chronic problem has been a shortage of supply, but the supply measures are too lax." He added, "Ultimately, this policy also focuses on punitive taxation, and I worry that the previous tax hikes and transaction regulations have only caused housing prices to soar beyond expectations, and this might be a replay of that."

He predicted, "Raising the comprehensive real estate holding tax (종부세) almost twofold is unprecedented punitive taxation even by foreign standards." He warned, "Such tax-centered housing price stabilization policies could become a replay of the August 31 measures (2005). The increased costs might be passed on to rents or sale prices, ultimately causing rises in rents and housing prices."