[Economic Outlook] Housing Supply Plan Announcement This Week... Interest Also in Whether Negative Inflation Will End

The Partial Amendment to the Housing Lease Protection Act passed the National Assembly plenary session on the 30th with 185 votes in favor and 2 abstentions out of 187 members present./Photo by Yoon Dong-ju doso7@

[Sejong=Asia Economy Reporter Kim Hyunjung] This week, the government will unveil housing supply measures aimed at stabilizing the real estate market. Attention is also focused on whether the consumer price index, scheduled to be announced on the 4th, will escape the negative growth trend.

According to the government and financial authorities on the 1st, the government plans to announce housing supply measures around the 4th, when the tax law amendment bill is expected to pass, including easing regulations on floor area ratio and height restrictions.

The comprehensive real estate tax law, corporate tax law, and income tax law amendments proposed in the December 16, June 17, and July 10 real estate measures last year and this year are also pending approval. The amendment to the comprehensive real estate tax law includes raising the tax rate by taxable standard brackets from the current 0.6?3.2% to 1.2?6.0% for owners of three or more houses or two houses in regulated areas. The corporate tax law will be revised mainly to increase the additional corporate tax rate imposed on capital gains tax on houses held by corporations from the current 10% to 20%. The income tax law amendment plans to raise the capital gains tax surcharge rate on short-term holdings under two years and houses owned by multi-homeowners in regulated areas, and to include pre-sale rights in the number of houses when imposing the capital gains tax surcharge on multi-homeowners.

These related law amendments, collectively called the 'Real Estate 3 Acts,' are likely to pass as the Democratic Party, which holds all standing committee chairmanships and has a majority in seats, pushes them through despite opposition from opposition parties.

The government has mentioned that if these tax law amendments pass, it will release housing supply measures around the same time. Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki recently said at the National Assembly’s Planning and Finance Committee, "When the housing supply measures are announced, I think there will be various impacts and repercussions on the market due to a significant supply volume," adding, "The government is also giving special consideration to rental supply."

[Image source=Yonhap News]

Attention is also focused on the consumer price trend to be announced by Statistics Korea on the 4th. The market is divided on whether the 0.0% flat rate recorded in June, following the negative (-0.3%) inflation in May, was a preliminary stage before turning positive. The effect of the disaster relief funds distributed in May is expected to be limited, while consumer sentiment remains subdued due to the COVID-19 pandemic.

This week, the Korea Development Bank is expected to officially announce its position on HDC Hyundai Development Company's acquisition of Asiana Airlines. Differences in positions among Hyundai Development Company as the acquirer, Kumho Industrial as the seller, and creditors have emerged, leading to speculation that the acquisition of Asiana Airlines will ultimately fail. In particular, Hyundai Development Company argues that due to the drastically changed market conditions surrounding airlines caused by the COVID-19 pandemic, a re-due diligence is necessary.

On the 5th, the Bank of Korea will announce foreign exchange reserves as of the end of July. As of the end of June, foreign exchange reserves stood at $410.75 billion, an increase of $3.44 billion from the end of May. On the 6th, the provisional balance of payments for June will be released.