Economic Expert Kim Jin-pyo of the Democratic Party: "Tax Deferral for Multi-Homeowners and Other Exit Strategies Needed"

"To See Policy Effects, Properties Must Be Listed
Various Plans Should Be Broadly Reviewed"
Real Estate Market and Opposition Party Say "Exit Strategy Needed"
Policy Committee and National Economic Advisory Council to Continue Related Discussions

[Asia Economy Reporter Jeon Jin-young] Kim Jin-pyo, a leading economic expert of the ruling party, the Democratic Party of Korea, is pushing for measures to open a way out, such as tax deferrals, to induce multi-homeowners to put their properties on the market. To this end, Kim plans to review the issue not only within the party's Policy Committee but also at the National Economic Advisory Council level.

[Image source=Yonhap News]

According to a Democratic Party official on the 11th, Kim said in a closed-door speech at the party caucus meeting on the afternoon of the 10th, "We need to look into tax benefits so that multi-homeowners can sell their houses according to policy, and if there are any deferrals possible, they should be granted." Kim, who served as Deputy Prime Minister for Economic Affairs, is regarded as an 'economic expert' within the party.

Kim plans to continue discussions on the specific scope and applicable targets at the Policy Committee and National Economic Advisory Council levels. In a phone interview with Asia Economy on the same day, Kim said, "We have not yet decided specifically which taxes to defer, but we will review various options broadly," adding, "We intend to discuss this first at the Policy Committee and the National Economic Advisory Council." The National Economic Advisory Council, chaired by Kim, is an intra-party body where the party, government, and industry review and propose various economic policies.

In his closed-door remarks the previous day, Kim said, "For many real estate measures announced by the government to be effective, first, demand must change, and second, the properties held by multi-homeowners must come onto the market," adding, "Demand can be somewhat alleviated through public pre-sale and rental pre-subscription announced by the government. The problem is that the properties held by multi-homeowners are not being released into the market," highlighting the need for policy supplementation.

Since the announcement of the July 10 real estate measures, the Democratic Party has forecasted strong regulations targeting multi-homeowners, including additional measures. On July 14, Kim Tae-nyeon, the Democratic Party floor leader, stated, "The July 10 real estate measures are aimed at eradicating speculative transactions seeking short-term profits and multi-homeownership for speculative purposes," and added, "The deferral of capital gains tax increases until June 1 next year is a strong recommendation to sell houses other than primary residences before then." Regarding the possibility that multi-homeowners might choose to gift properties instead of selling them, he warned, "We will consider additional measures such as raising acquisition taxes on gifts."

However, in the real estate market, there have been continuous calls to provide an 'exit route' such as deferring the capital gains tax hike. The argument is that it is inappropriate to raise both the comprehensive real estate holding tax, which is a holding tax, and the capital gains tax, which is a transaction tax, simultaneously. Some voices strongly advocate releasing multi-homeowners' properties through temporary capital gains tax reductions. In particular, the opposition party has consistently raised calls for easing the real estate tax burden. The People Power Party's legislative agenda announced the previous day for the 21st National Assembly includes easing the tax burden on homeowners and reducing capital gains and acquisition tax rates.

Kwon Dae-jung, a professor in the Department of Real Estate Studies at Myongji University, analyzed, "While a temporary reduction is the fundamental remedy to induce property listings, given the current situation, deferring capital gains tax could also be effective."