Flood of Real Estate Easing Policies
Democratic Party Ahead of Next Year's Presidential Election
Growing Calls for Internal Policy Shift
Considering Policy Reversal and Adjustment Plans Including Reduced Holding Tax Burden for Single-Homeowners
[Asia Economy Reporters Jeon Jinyoung and Gu Chae-eun] The Democratic Party of Korea, facing the defeat in the April 7 by-elections, is making every effort to mend the public sentiment on real estate. With the presidential election just over 11 months away, there is a deep sense of urgency that calming the heated public sentiment caused by real estate issues is the top priority to seek a rebound in approval ratings.
Within the Democratic Party, voices calling for a change in the real estate policy stance have been raised daily. On the morning of the 14th, Representative Hong Young-pyo, who declared his candidacy for party leader, said in an interview with KBS Radio’s ‘Choi Kyung-young’s Strongest Current Affairs,’ "I believe the major direction and framework should not be shaken," but also argued for the need for change, saying, "However, we need to review some detailed policies and present realistic measures again."
At the three-term lawmakers’ meeting the day before, opinions were also raised that a comprehensive review of real estate policies is necessary. After the meeting, Democratic Party lawmaker Seo Young-kyo told reporters, "We agreed to look at real estate policies more precisely. Rather than rushing, we agreed that in-depth discussions are needed. The opinions will be conveyed to the leadership, and we will discuss and create alternatives."
The Democratic Party is considering fine-tuning measures in two directions: easing the property tax burden on single-homeowners and relaxing loan regulations. Regarding the comprehensive real estate tax (종합부동산세, Jonghap Budongsan Se), proposals include postponing the tax rate increase or raising the official property price standard. The idea is to ease the tax burden by postponing the increase in the comprehensive real estate tax, which is applied from 0.5?2.7% to 0.6?3.0% starting this year. Another proposal is to raise the tax base threshold from the current official property price of 900 million KRW to 1.2 billion KRW or more. Jung Soon-gyun, mayor of Gangnam District affiliated with the Democratic Party, said in a media interview on the 13th, "We have already requested the Ministry of Strategy and Finance to raise the comprehensive real estate tax base from 900 million KRW to 1.2 billion KRW."
There is also a proposal to expand the criteria for property tax reduction on houses from the current 600 million KRW or less to 900 million KRW or less to reduce the property tax burden. The government decided to lower the property tax rate by 0.05 percentage points for three years starting this year for single-homeowners with houses valued at 600 million KRW or less. The idea is to relax the criteria to further expand the scope of tax reduction.
Another proposal is to limit the annual increase rate of official land prices for houses valued at 900 million KRW or less to no more than 10%. This was a pledge made by former Minister of SMEs and Startups Park Young-sun during her Seoul mayoral campaign. At a rally on the 26th of last month, Park said, "I will strongly recommend to the Democratic Party to establish a system to adjust the official land price increase rate so that it does not exceed about 10% for houses valued at 900 million KRW or less, and push for its implementation," effectively putting a brake on the policy of land price realization. Park also submitted this proposal to the Democratic Party’s Policy Committee and urged the passage of the related bill in the April National Assembly session.
Opposition parties are also continuing to propose bills related to easing real estate regulations. The People Power Party plans to push forward bills currently pending in the National Assembly, such as a local tax law amendment to reduce property tax by up to 50% for single-homeowners with official property prices of 900 million KRW or less, and a tax special cases restriction law amendment to temporarily exempt capital gains tax surcharges. Inside and outside the ruling party, voices are growing that, given the severe public sentiment backlash on real estate, a full policy revision through cooperation with the opposition is necessary. Democratic Party lawmaker Park Wan-joo, who is running for floor leader, said, "We will review the entire real estate policy through cooperation with the opposition."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
