Owners of multiple houses face heavy punitive taxes

The Korea Times

The Korea Times

Finance

Wed, December 6, 2023 | 16:02

Economy

Owners of multiple houses face heavy punitive taxes

Posted : 2020-07-10 15:53

Updated : 2020-07-11 10:37

Gov't unveils 22nd measure to curb speculations

By Park Jae-hyuk

The government will impose heavier taxes on owners of multiple homes and those who sell their properties within two years after purchasing them, as part of efforts to stabilize the housing market, the Ministry of Economy and Finance said Friday.

Real estate experts, however, remained skeptical about whether the administration's 22nd real estate policy will be effective enough to curb property speculation.

According to the new measures, individuals and corporations owning multiple houses will face up to a 12 percent acquisition tax. Those who own more than three homes or who have more than two houses in areas designated as "speculative zones" will have to pay up to 6 percent in comprehensive real estate holding tax, up from the current 0.6 percent to 3.2 percent. The capital gains tax rate imposed on multiple home owners will also be raised by 10 percentage points.

Punitive taxes will also be imposed on those who pursue short-term profits from housing sales.

The capital gains tax imposed on those who sell houses within a year after their purchase will rise to 70 percent from 40 percent; while people who sell them after holding them for more than a year but less than two will pay 60 percent.

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The government vowed to revise the real estate taxation system within July by persuading lawmakers into passing the revision bill during this month's National Assembly session.

In response to concerns that multiple home owners may not sell their houses due to the high capital gains tax, the government said it would raise the tax in June 2021 to induce them to sell by then.

"By raising the acquisition, holding and transfer tax rates, we will prevent short-term owners and multiple home owners from making profits from real estate speculation," Deputy Prime Minister and Finance Minister Hong Nam-ki said. "The government's economic team will go all out to prevent unearned income in the housing market, provide young people with opportunities to own houses and stabilize the real estate market."

In this regard, the government has also come up with measure to relieve the burden on young and low-income people who seek to buy houses.

First-time buyers will be exempt from acquisition taxes if the houses costs less than 400 million won ($332,000). Married couples, whose collective annual incomes are lower than 80 million won, will be able to get mortgages with a 10 percentage point higher loan-to-value ratio. Interest rates on loans for rent payments will also be lowered.

The government also promised to take measures to increase the housing supply significantly.

It decided to organize a taskforce under the supervision of the finance minister to consider various measures, such as developing the downtown area, raising floor area ratios in "new towns" and using spaces previously used as sites for public institutions that moved to rural areas.

In addition, the government plans to abolish tax incentives for landlords registered as businesses, because criticism has grown after some of them exploited those benefits to speculate in real estate, destabilizing the housing market.

Experts advised the government to make more efforts to expand housing supplies, forecasting punitive taxes will not be effective enough to lead multiple home owners to sell.

"At this time of rising real estate prices, taxation cannot stabilize the market," Kwon Dae-jung, a real estate professor at Myongji University, said. "If the government raises taxes without increasing supply, housing prices will go up further due to this lack."

pjh@koreatimes.co.kr