[Second Half Economic Policy] 'No Increase in Comprehensive Real Estate Tax'... Government Decides to Maintain Fair Value Ratio at 60%

The comprehensive real estate tax fair market value ratio will be maintained at last year's level, and the sunset provision for tax benefits to landlords who reduce rent for small business tenants will be extended until the end of next year. An additional 23 trillion won will be supplied for housing purchase and jeonse funds targeting the homeless and youth.

On the 4th, the government held a briefing jointly with related ministries and announced the '2023 Second Half Economic Policy Direction,' which includes measures to ease housing cost burdens.

First, the government set the comprehensive real estate tax (종부세) fair market value ratio at 60%. It was lowered from 100% in the second half of last year to 60%. This aims to restore the tax burden to the 2020 level before the rapid rise in real estate prices. Regarding property tax, the Ministry of the Interior and Safety announced last month that the fair market value ratio for single-homeowners will be further reduced from 45% to 43~45%.

The tax support for "good landlords," which was scheduled to expire at the end of this year, will be extended by one year. This allows a deduction of up to 70% of the rent reduction amount from income and corporate taxes, an increase from 50% in 2020 to 70% since 2021.

To reduce the burden of mortgage loan interest, the government will also raise the income deduction limit for interest repayment on long-term housing mortgage loans. For example, the deduction limit for interest repayment on loans with a repayment period of 15 years or more (fixed interest rate, non-grace period) will increase from 18 million won to 20 million won.

The government also presented measures to strengthen housing support for youth and newlyweds. An additional 23 trillion won will be supplied for housing purchase and jeonse funds such as Didimdol and Buteemok loans, operating a total of 44 trillion won. The annual payment limit for income deduction on the Housing Subscription Savings will be raised from the current 2.4 million won to 6 million won. Tax benefits (preferential interest rates, tax exemption on interest income) for youth-preferred products will continue. Along with this, the government will also implement institutional improvements to ensure the sustainability of subscription savings and the Housing and Urban Fund.

It also includes full support of up to 300,000 won for the youth's jeonse deposit return guarantee fee. This project, which some local governments have implemented for tenants with deposits under 300 million won, annual income under 50 million won (70 million won for newlyweds), and homeless youth, will be expanded nationwide.

Furthermore, a graduated installment repayment method considering the future income (repayment ability) of youth will be introduced, and income requirements for special loans used by newlyweds to purchase homes or rent jeonse houses will be relaxed. Accordingly, the income limit for home purchase will increase by 150 million won to 850 million won per year, and for jeonse, it will increase by 150 million won to 750 million won per year.