Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Reporter's Notebook Housing market will remain 'uneasy' without hefty tax cut
Finance Minister Hong Nam-ki speaks during a meeting with investment bank experts at the Government Complex Seoul, Friday. Yonhap
By Lee Min-hyung
By Lee Min-hyung
The Ministry of Economy and Finance should raise its voice against the hefty level of the real estate transfer tax, as easing this burden on multiple-home owners will be the most effective measure in stabilizing Korea's housing market.
It is true the ministry cannot make such a decision on its own, but the authority should be reminded that this is apparently the only way to temporarily put a brake on the years-long sharp increases in apartment prices in Seoul and other metropolitan cities nationwide.
The basic stance of the government toward real estate policy remains unwavering: levying heavy taxes on the owners of multiple homes. To some extent, the finance ministry should map out policies in line with the stance of the incumbent administration, but it is high time that it listened to the voice from the market, rather than sticking to unilateral, ineffective and what are widely considered failed housing policies.
Finance Minister Hong Nam-ki recently warned of a possible fall in the prices of Seoul apartments, urging those who plan to purchase in the capital to think twice over what he sees is a price bubble in the market.
Hong looks to have delivered the message in the hope of stabilizing the market by curbing potential demand from non-homeowners who plan to buy apartments in Seoul at record high prices.
Despite the warning, there is widespread expectation that the housing market in overheated areas ― such as Seoul and its surrounding cities ― will continue its bullish run in the latter half of the year unless the government and the authorities take concrete actions to increase supply there.
But as multiple-home owners do not have any immediate plans to sell their homes due to them having to pay the heavy transfer tax of up to 75 percent of their gains, there is little chance for a near-term boost in the housing supply.
Hong also cited possible tapering in the U.S. as another factor to drive a fall in Korea's housing prices.
The external macroeconomic factor may have an effect on asset prices here, but the key variable determining the housing price in Korea is the supply issue.
The warning will not have any effect without concrete actions to expand the housing supply. The only way to do this at the moment is to get multiple-home owners to sell their “excess” property via relieving them of the tax burden.