Lee Hyo-jin covers the Bank of Korea, the banking industry and broader financial news. Her previous beats include foreign affairs, North Korea and general reporting on Korean society.
Lee signals tougher property holding taxes to curb housing speculation
President Lee Jae Myung listens to speakers during a public forum on housing policy at KBS Hall in Yeouido, Seoul, Thursday. Yonhap
By Lee Hyo-jin
President holds public forum ahead of real estate tax overhaul
President Lee Jae Myung on Thursday signaled stronger property holding taxes to curb housing speculation, saying speculative multiple-home owners should bear a heavier tax burden than owner-occupiers.
The remarks came during a televised public forum on housing policy ahead of the government's tax reform package expected later this month. The package is aimed at reining in runaway housing prices, as speculative purchases drive home prices high, leaving many people unable to afford to own their own homes.
"To bring Korea's property holding taxes in line with those of advanced economies, they would have to be raised at least threefold. But if we tripled them now, it could trigger something close to a public uprising," Lee said.
"If we leave things as they are, the problem will deal a massive blow to the country. We need to address this issue, even if it comes at a political cost."
Lee said there was broad public support for stronger property holding taxes, but stressed that tax policy should differentiate between owner-occupiers and those owning multiple homes for speculative purposes.
Owner-occupied homes should be subject to a reasonable baseline tax burden, he said, with higher taxes applied based on factors such as the number of homes owned, property values and location.
"People who own multiple homes for rental or investment are clearly seeking to build wealth through property," Lee said. "Policies should be designed to protect people who own homes in order to live there."
Lee cautioned, however, that determining the appropriate level of differentiated taxation system — including where to draw the line for high-value homes — would be difficult and therefore requires further review.
The government is expected to unveil a broader real estate tax package later this month, including changes to property holding and capital gains taxes.
Construction work is underway at an apartment complex in Seoul's Seocho District, Thursday. Yonhap
The forum came as the Lee administration faces mounting pressure to rein in soaring home prices, with Seoul's housing market showing little signs of cooling, despite government measures aimed at curbing speculative demand.
About 140 people took part in the event, including housing experts, real estate agents, financial professionals, academics, journalists and members of the public. The discussion ran for over three hours, well beyond its scheduled 100 minutes, as participants debated issues ranging from taxation, mortgage schemes and housing supply.
Housing finance was a major topic of discussion.
Lee identified Korea's "jeonse" loan program as one of the factors behind the sharp rise in apartment prices. Jeonse is a unique Korean rental system under which tenants make a large lump-sum deposit instead of paying monthly rent.
"The government made jeonse loans virtually unlimited in the name of supporting low-income households. Since it became so easy to finance jeonse, home prices went up," the president said, questioning why someone who already owns a home should be allowed to take out a loan to rent another one.
"But there is an answer. We need to tighten regulations on jeonse loans to prevent home prices from surging."
He added that such financial support should be implemented on a targeted basis for people with genuine housing needs, including young people, newlyweds and first-time homebuyers.
President Lee Jae Myung participates in a public discussion on housing policy at KBS Hall in Yeouido, Seoul, Thursday. Korea Times photo by Wang Tae-seog
On the supply side, Lee pledged to accelerate development of the "third-generation new town project," a government-led housing project to build about 170,000 homes in areas surrounding Seoul, including Namyangju, Hanam and Goyang in Gyeonggi Province.
At the same time, he expressed caution about relying too heavily on large-scale redevelopment and reconstruction projects to expand housing supply.
"Redevelopment projects generally reduce the total number of households," Lee said. "They improve the living environment and provide higher-quality housing, but many existing residents are forced to leave. In densely populated areas, the total number of homes can actually decline."