Real Estate Public Sentiment Divides 4·7 By-Elections
Discussions on Raising Comprehensive Real Estate Tax Threshold and Temporary Suspension of Capital Gains Tax Surcharge
Kim Tae-nyeon, Acting Leader of the Democratic Party of Korea, and others showed stern expressions on the 7th after checking the exit poll results of the April 7 by-elections at the situation room set up at the central party office in Yeouido, Seoul. Photo by National Assembly Press Photographers Group
[Asia Economy Reporter Jang Sehee] Attention is focused on whether there will be changes to the regulation-oriented real estate policy stance following the ruling party's crushing defeat in the April 7 by-elections. Since the results reflect public sentiment on real estate, there is speculation that the policy will be revised in some form going forward. A key ruling party official stated on the 8th, "We will likely need to discuss additional supplementary measures to eradicate speculation and protect actual buyers at the April National Assembly session," adding, "We plan to first review the deduction aspects for the elderly and long-term holders."
There appears to be a consensus that the real estate policy, reflecting public sentiment on the policies promoted by the current government and ruling party in this election, needs partial supplementation.
The most attention-grabbing issue is the easing of the comprehensive real estate tax (종합부동산세, Jonghap Budongsanse) taxation criteria. It is seen as a card to soothe public sentiment ahead of the heavy taxation on multiple homeowners scheduled for June. Although the official property prices have risen rapidly recently, the comprehensive real estate tax threshold has remained unchanged at 900 million KRW for 12 years. Prime Minister Chung Sye-kyun stated, "Since the comprehensive real estate tax imposition standard (official housing price of 900 million KRW) was set, house prices have risen significantly. Adjusting it only for single-home households respects them without nullifying the tax." Jung Soon-gyun, mayor of Gangnam-gu, Seoul, and a member of the Democratic Party, recently requested that the tax threshold for single-home households be eased from 900 million KRW to 1.2 billion KRW in official property price.
There is speculation that the comprehensive real estate tax issue will be discussed at the National Assembly if the extraordinary session is held this month.
The Democratic Party also plans to push for raising the loan-to-value ratio (LTV) and debt service ratio (DSR) for long-term non-homeowners and first-time buyers. They intend to expand the scope and benefits of the current 10 percentage point preferential treatment to ease loan regulations.
The ruling party may also consider the opposition's proposal to temporarily postpone the heavy capital gains tax. Delaying the implementation to ensure multiple homeowners definitely put their properties on the market is also under consideration. However, postponing the tax start before June could be seen as a retreat in real estate policy, so whether it will actually be pursued is uncertain. Some suggest increasing deduction benefits for 'long-term holders and the elderly' as a simple alternative that protects actual buyers.
However, the government’s stance differs from that of the ruling party. A Ministry of Economy and Finance official said, "We are not internally considering additional easing," adding, "It is better to maintain consistency rather than frequently changing tax policies." Within the government, there are concerns that easing LTV and DTI could fuel overheating in housing prices due to increased liquidity. Since money has no tags, it could flow not only into real estate but also stocks and cryptocurrencies. A government official stated, "Maintaining the overall framework of household loan 'total volume management' while easing some regulations could cause confusion in the market."
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