Moon gov't eases tax burden on single home owners

Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki speaks during a meeting with relevant ministers on real estate policy at the Government Complex Seoul in central Seoul, Wednesday. It was the last in a series of policies announced by the Moon Jae-in administration. Yonhap

Experts view policy is unlikely to harmonize with President-elect's plans

By Yi Whan-woo

The Moon Jae-in administration introduced a set of measures that will lower property taxes for more than nine out of 10 single home owners nationwide, Wednesday. These measures are Moon's latest real estate policies, most of which are considered to have failed at stabilizing real estate prices and demand.

Jointly announced by the Ministry of Land, Infrastructure and Transport and other relevant ministries, the measures will also exempt 69,000 people from paying a tax levied exclusively on those who own homes that exceed 1.1 billion won ($907,600) in value and owners of multiple homes.

The government seeks to ease the burden on the aforementioned taxpayers, by using the state-assessed value for homes from 2021, instead of the one from this year, as the criteria for taxation.

The state-assessed value refers to the price of a property recognized publicly by the government as being appropriate for transaction. It is different from the market value, which is determined by supply and demand.

Considering that housing prices rise over time, applying last year's state-assessed value is anticipated to reduce the property tax for 93.1 percent of the single home owners whose homes are priced at 600 million won or less.

“The government has sought to ensure that the state-assessed value does not increase the burden on single home owners,” Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki said during a meeting on real estate with related ministers, Wednesday.

During a separate press briefing, a senior land ministry official estimate that the targeted 93.1 percent will be taxed an amount less than what they paid in 2020.

The official explained, by “virtually freezing the state-assessed value,” the amount of comprehensive real estate tax will be reduced as well.

The comprehensive real estate tax was originally adopted as a punitive measure against those who buy multiple homes for speculation purposes.

It, however, met protest from those who own a single but expensive home, and who consider it an additional burden on top of other property taxes.

The government expects about 69,000 people will be exempt from paying tax under the comprehensive real estate tax under the new policy.

And by applying last year's state-assessed value over this year's, another group of 145,000 who are still subject to the comprehensive real estate tax will pay 174.5 billion won less in taxes compared with the 416.2 billion won that would have been levied on them if applying this year's state-assessed value.

Among other measures introduced to ease the tax burden were enabling senior citizens to postpone paying the comprehensive real estate taxes as well as freezing the premium for national health insurance, which is levied based on their property's value.

But President-elect Yoon Suk-yeol, when he takes office on May 10, is likely to overturn most of the Moon government's real estate policies that have resulted in soaring home prices.

Many homeowners and would-be homeowners infuriated by the policies are believed to be behind the ruling Democratic Party of Korea's bitter defeat in the March 9 presidential election.

Asked how he would evaluate how the Moon administration has wrapped up its real estate policy, an expert said it will have little influence.

“I give credit to the government showing willingness to deal with the housing issue right up until the last minute,” said Kwon Dae-jung, a real estate professor at Myongji University. “But it won't do any good to ease the market situation that the policies for the past years were focused on collecting more tax and left a devastating impact.”

The professor said Wednesday's measure will “not be in sync with” Yoon's policies, noting the President-elect plans to refer to the state-assessed value of homes dating back to the Park Geun-hye administration in the mid-2010s to cope with the housing market.

He pointed out Yoon plans to ease housing taxes to a great extent, and is even considering scrapping the comprehensive real estate tax.

“In that regard, I think the government's measure was aimed at not losing votes in the local elections in June,” Kwon added.