[1 Year of Yoon Administration]⑪Real Estate Expert: "Easing Comprehensive Real Estate Tax is Positive... DSR Regulations Should Be Further Relaxed"

Six out of ten real estate experts evaluated the real estate policies pursued since the launch of the Yoon Seok-yeol administration as inadequate. Three viewed them positively, and one withheld judgment. Experts generally analyzed that the Yoon administration's measures, such as deregulation of restricted areas, the 1·3 measures, and the special Bogeumjari loan, failed to achieve the expected policy effects due to risks of economic slowdown and the low likelihood of a base interest rate cut within the year.

"Normalization of Distorted Regulations is Positive"

According to a survey conducted by Asia Economy targeting ten real estate experts, six out of ten respondents said they were disappointed with the Yoon Seok-yeol administration's real estate policies. In contrast, three respondents viewed them positively, and one did not answer.

[Image source=Yonhap News]

Respondents who positively evaluated the Yoon administration's real estate policies cited the partial normalization of distorted aspects from the previous government as a reason. Professor Park Hap-su, adjunct professor at Konkuk University Graduate School of Real Estate, said, "Excessive property tax, comprehensive real estate tax, heavy capital gains tax on multi-homeowners, and overly designated adjusted areas have been normalized. It is also positive that the ban on mid-term loans for apartments priced over 1.2 billion won, which was a bad law that kicked away the middle class's housing ladder, was abolished." He added, "Removing the price criteria for special supply also broadened the scope of beneficiaries in subscription, which was a good move."

Song Seung-hyun, CEO of City and Economy, said, "From the first day of the Yoon Seok-yeol administration on May 10, 2022, the Enforcement Decree of the Income Tax Act was revised to temporarily ease the capital gains tax rate on multi-homeowners for one year." He added, "Instead of the highest heavy tax rate of up to 75% for multi-homeowners, a basic tax rate of 45% was applied to reduce the tax burden and lay the foundation for revitalizing transactions. As a result, apartment listings in Seoul increased by more than 4% just two days after the decree revision."

"Contributed to Soft Landing of Real Estate Market through 1·3 Measures"

Experts particularly evaluated positively the deregulation of restricted areas, the 1·3 measures, and the launch of the special Bogeumjari loan. Ham Young-jin, head of the Zigbang Big Data Lab, said, "In the midst of rapid base interest rate hikes, the introduction of low-interest fixed-rate refinancing loans and deregulation of restricted areas helped the real estate market to partially recover transaction volumes in the first quarter compared to the end of last year, contributing to a soft landing of the market." Additionally, Jin Tae-in, team leader of Jiptos Apartment Brokerage Team, said, "Allowing the market to self-assess through deregulation of speculative overheated areas and adjusted areas, and providing opportunities to those who truly need housing purchase and tenant eviction loans through the special Bogeumjari loan were positive steps."

At the beginning of this year, the government significantly eased related regulations to prevent a hard landing in the real estate market. Key measures included deregulation of restricted areas, relaxation of non-priority subscription conditions, abolition of mid-term loan criteria based on sale prices, and easing of resale restrictions. Considering that the interest rate hike trend has not completely stopped, it is generally assessed that the government's measures have somewhat warmed the frozen apartment sales market.

Lab head Ham said, "The volume of sales transactions increased in the first quarter compared to the end of last year, and the price decline in major areas such as Seoul has also slowed." He added, "Although the total number of unsold units increased over the year, liquidity risks for construction companies, which surfaced after the Legoland bond risk at the end of last year, have somewhat eased due to the 1·3 measures."

The supply of 500,000 youth housing units and the promotion of the 3rd new town construction also received favorable evaluations. This is because the Yoon administration's supply expansion policies are expected to contribute to housing price stabilization. Han Moon-do, professor of Finance and Real Estate at Yonsei University Graduate School of Political Economy, said, "Relaxation of reconstruction regulations, 500,000 youth housing units, commencement of housing construction in the 3rd new town, and expansion of subscription lottery systems are necessary policies for stabilizing housing prices." However, he added, "While deregulation measures help with a soft landing, they are insufficient to eliminate speculative elements."

DSR Regulations Persist; Legislative Delays Diminish Policy Effects

Experts expressed some disappointment regarding the Debt Service Ratio (DSR) regulations. Professor Park Hap-su said, "The DSR 40% limit remains." He criticized, "It was created by the previous government to excessively suppress demand, but it severely restricts the loan amount available to the middle and lower-income classes rather than the wealthy, infringing on the property rights of buyers. It should be raised to 60-70%." Research team leader Yoon Ji-hae also said, "DSR is one of the main causes of jeonse fraud, and the question is how much to ease it." She suggested, "It should be raised gradually by 10 percentage points among the general public."

There were also opinions that the effects of the measures were diminished due to slow legislation. Currently, resale restrictions have been eased since last month through amendments to the Enforcement Decree of the Housing Act, but the Housing Act amendment related to abolishing the actual residence obligation, a package policy, is stalled in the National Assembly. The amendment to the Reconstruction Excess Profit Recovery Act, considered the last hurdle for reconstruction complexes, has also not yet passed the National Assembly. Team leader Jin Tae-in said, "Various tax and housing law amendments requiring parliamentary approval have been delayed, so the effects have been minimal compared to announcements." He added, "In the current difficult legislative environment, the market is expected to respond more sensitively to domestic and international interest rates and the economy for the time being."

Park Won-gap, senior real estate expert at KB Kookmin Bank, also said, "Legislation is needed for previously announced measures." He added, "Legislation has not yet been completed for easing acquisition tax on multi-homeowners, easing reconstruction excess profit recovery regulations, allowing apartment purchase rental businesses, and lowering short-term capital gains tax rates, so persuading the opposition party is necessary."

Professor Park Hap-su emphasized, "The reconstruction burden easing plan was announced last September, but seven months have passed with no progress." He added, "While the increase in complexes passing safety inspections due to easing is positive, the part about recovering excess reconstruction profits should be boldly abolished."

"Challenges such as Polarization and Unsold Units... Policies Tailored to Market Conditions Needed"

The deepening polarization between the metropolitan area and provinces over the past year is pointed out as a limitation. Managing the monthly 70,000 unsold units is also an urgent task.

CEO Song Seung-hyun said, "After the announcement of the 1·3 real estate measures, apartment sales transactions have shifted to an increasing trend due to the easing of various regulations such as mid-term loans, resale restrictions on pre-sale rights, actual residence obligations, and subscription requirements. The sales market is also recovering, especially in sites making self-efforts." He cautioned, "However, the polarization in subscription competition rates between Seoul and non-Seoul areas needs attention."

Research fellow Lee Eun-hyung of the Korea Institute of Construction Policy said, "The effect of a soft landing in the market is partially visible, as seen in the high competition rate for non-priority subscriptions at Dunchon Jugong." However, he added, "Polarization by region and location is expected to intensify for the time being."

Chae Sang-wook, CEO of Connected Ground, said, "The special Bogeumjari loan greatly contributed to market stabilization." However, he noted, "While the existing housing market was stabilized, unsold units increased. Especially as the metropolitan area revived, unsold units in the provinces increased further. Due to the nature of money flow, deregulation inevitably leads to concentration in the metropolitan area."

For these reasons, experts suggested that while the focus has been on revitalizing the sales market since the administration's launch, policies to resolve unsold units should be prepared going forward. CEO Chae said, "Deregulation policies strengthen asset markets and increase unsold units in the provinces, causing market polarization, but resolving unsold units should be the top priority." He added, "With the deregulation of restricted areas, price reviews for pre-sale prices were removed, leading to higher prices, which in turn increased unsold units, as seen in Yongin Platform City."

There was also criticism that no additional measures have been promptly introduced in response to market conditions beyond presidential pledges. CEO Chae said, "The presidential pledges were made during the housing price surge in 2021. If the market situation changed in 2022, the policies should have been adapted accordingly, but the original plan was followed as is. For example, the 1st new town special law was enacted simply because it was in the plan, not because of market communication. Tax reforms were a mid- to long-term task, but announcements were made arbitrarily, and as a result, the ruling and opposition parties have yet to agree on capital gains tax."

CEO Song suggested, "It is necessary to consider easing acquisition tax for multi-homeowners, reviving registered rental businesses, and abolishing the land transaction permit system."