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People with multiple homes face heavier taxes
An apartment complex in Songpa district in southern Seoul / Korea Times file
By Lee Kyung-min
Stricter real estate policy set to suppress home prices
By Lee Kyung-min
People with multiple homes are set to face heavier taxes after the ruling Democratic Party of Korea (DPK) garnered a landslide victory in Wednesday's general election.
The DPK and its “satellite” Civil Together Party won 180 National Assembly seats, three-fifths of the 300 total, meaning it can pass any bill, other than a constitutional revision, without a parliamentary impasse.
The government and the ruling party will discuss tax code revisions at an extraordinary Assembly session scheduled for late April.
At the top of the agenda sits increasing the tax rate to up to 4 percent of the officially assessed land price before June 1, the date when the heavier tax will be imposed with the new tax code applied. The rate will be 3 percent for those who own one home.
Also to be raised is the ceiling of the maximum tax from 200 percent of the amount paid the in the previous year to 300 percent.
The stricter rule combined with the COVID-19 pandemic could dampen the property market, according to an expert.
Seoul Digital University professor of real estate Lee Young-soo said apartment prices will stay low for the time being as the impact of the current downturn is likely to continue well into the next quarter, or even through to the end of the year.
“The new policies will certainly lead to a market-wide depression, already in significant progress due to the novel coronavirus outbreak,” Lee said.
The market has lost vibrancy, indicated by apartment prices showing signs of decline as of late following rapid increases over the past few years.
This in his view will lead to a broader shock to market participants whose livelihoods are to suffer.
“The market will turn stagnant because there are no sellers, with no new construction planned. Throwing coronavirus into the mix and the market has no momentum,” he added.
Yet, he expressed some hope that rules may be revised in a way that goes easy on owners of one home.
“Would they have to sell the place they have lived in for years just to avoid tax? It is nonsensical, all the more so, given most of them are old people nearing retirement age. Former Prime Minister Lee Nak-yon and some ruling party figures hinted at this and he won votes.”
According to data analyzed by Zigbang, a real estate service provider, 287 apartments were sold in March in the Songpa, Seocho and Gangnam districts in southern Seoul known for ultra-high home prices. This was a 62 percent drop from a month earlier.
The trading volume in the same month was 247 in the Mapo, Yongsan and Seongdong districts in northern Seoul, down 56 percent from 559 the previous month.
The Korea Appraisal Board's apartment trading index was 98.4 in the second week of April. A below-100 figure means sellers outnumber buyers.