Gov't to confiscate illegal gains from real estate speculation

Finance Minister Hong Nam-ki, right, and Prime Minister Chung Sye-kyun enter a briefing room to announce the government's anti-real estate speculation measures at Government Complex Seoul, Monday. Yonhap

By Lee Min-hyung

The government unveiled a toughened set of anti-real estate speculation measures on Monday and threatened to confiscate any undue gains from government officials found to have engaged in speculative acts.

The Ministry of Economy and Finance devised a total of 20 core measures against real estate speculation. The decision was made amid heightened public uproar over the nationwide scandal surrounding the state-run Korea Land and Housing Corp. (LH), with some of its officials found to have reaped illegal profits through real estate speculation.

“The government has come up with the measures with firm determination that this is the last opportunity for us to stop the chain of corruption in real estate and regain public trust,” Finance Minister Hong Nam-ki told reporters during a briefing, Monday.

First and foremost, the government decided to strengthen partnerships with 43 prosecution offices nationwide to establish an investigation team for probing real estate speculation cases. More than 500 prosecutors will join the team, which makes the number of pan-governmental real estate investigation personnel over 2,000.

The government also pledged to slap the “toughest punishment” on government officials found to have engaged in real estate corruption.

Under the decision, any government officials involved in real estate speculation will face the maximum penalty allowable by law. All the unfair gains they earned from speculations will be confiscated, and they will also pay fines of up to five times their illegal profits.

The National Tax Service will also enhance its monitoring for real estate tax evasion by forming a dedicated special investigation team. It will carry out toughened investigations on suspected real estate tax dodgers nationwide.

The Financial Services Commission will also join the anti-speculation movement. The authority will establish a special team to keep track of any illegal signs of capital flow into real estate markets. It will monitor any signals over illegal real estate loans, and notify the police and the tax authority of details when catching such signs.

The finance ministry also placed a temporary ban for all LH employees to obtain new property assets, and warned that those who do not abide by the rule will be dismissed.

The ministry also decided to impose a capital gains tax of 70 percent on any land transactions for those who sell less than a year after obtaining the sold property. Starting from next year, the government will also increase a heavy tax of up to 20 percentage points on land transactions for owners making sales less than two years after their purchases.

To encourage more people to report any illegal property speculators, the government will offer a maximum 1 billion won ($882,000) as part of a monetary incentive for those who report speculators.

But experts said the measures still leave much to be desired.

“The gist of the anti-speculation measures should be on preventing government officials from purchasing properties under borrowed names,” Myongji University professor Kwon Dae-jung said. But no specific discussions are being held on this point, which raises doubts over whether authorities remain sincere in their pledge to root out real estate speculation by government officials, according to him.

Early this month, the government's joint probe team announced the first round of investigation results over the LH scandal. It found a group of 20 LH officials had purchased land in areas such as Gwangmyeong and Siheung in Gyeonggi Province, which were being designated for a massive urban development project. The police are looking into whether they relied on insider information before the announcement of the project.

In late February, the government designated land in Gwangmyeong and Siheung as two of its six new development areas. But soon after the announcement, a nationwide controversy erupted amid speculations that some LH officials had gone on a buying spree of land worth 10 billion won ($8.84 million) in the areas since 2018, in an apparent move to seek speculative profits there.

Public fury reached its peak following the scandal. This was because public sentiment over the government's real estate policies plunged to the lowest level while the government's botched real estate policies ended up skyrocketing housing prices across the nation for the past few years.

But the corruption scandal in the state-run organization has aggravated the public's already-negative sentiment over the government's series of regulation- and taxation-driven real estate policies.

On Monday, Kim Sang-jo, chief policy secretary to President Moon Jae-in, stepped down from his post amid widening controversy that he raised the leasing price by 14 percent for an apartment he was renting out, just a few days before the introduction of a new housing law that caps apartment rent price increases at 5 percent.

The DPK issued belated apologies Monday for the government's failed real estate policy drives.

“The policies were aimed at curbing speculation and stabilizing housing prices, but in reality, the result was the exact opposite,” Rep. Kim Jong-min of the DPK said Monday. The public fury is escalating not just because of the LH scandal, but also the botched real estate policies from the government and the ruling party, he said.