By Yoon Ja-young
After the government hinted property taxes will be raised on real estate investors, the market is examining various scenarios of the tax revision.
During a briefing on economic policy directives for the next year, Finance Minister Kim Dong-yeon said the government will comprehensively consider diverse factors such as equity in taxation.
"Since tax revision has a huge impact, it is crucial to have a discussion. We will prepare measures after gathering diverse opinions through a special committee," he said.
The official tax hike plan on homeowners is expected to be unveiled in August when the government announces its tax revision plans.
Raising property taxes has been regarded as the government's last hidden card to stabilize housing prices, as it had been cautious about the tax hike. Policymakers have trauma over tax hikes since they witnessed how the 2003-08 President Roh Moo-hyun administration was damaged by "comprehensive real estate tax." The Roh administration, whose ideology the Moon administration has inherited, introduced the tax to curb soaring housing prices, but it ended up losing votes due to strong resistance from taxpayers who criticized it as a "tax bomb."
Since the housing market shows signs of overheating, the administration seems to be left with no option but the property tax hike. Unlike previous administrations which tried to bolster the housing market to pull up economic growth, the Moon Jae-in administration has declared war on real estate speculators. On Aug. 2 it announced real estate stabilization measures, which include levying heavy capital gains taxes on those who have invested in multiple homes on top of restricting mortgages.
However, it failed to curb apartment prices in Seoul. According to Korea Appraisal Board, apartment prices in Seoul rose 3.82 percent between January and November this year, picking up pace from the previous year. Prices rose especially steep in southern districts where high-priced apartments are located.
"There has been polarization between Seoul and provinces following the Aug. 2 measures. Demand has always surpassed supply in Seoul as additional supply of homes is restricted there." said Chae Sang-wook, an analyst at Hana Financial Investment.
He added those who have invested in multiple homes in the provinces seem to be selling them to purchase one good apartment in Seoul instead, further pulling up the apartment prices in key areas of Seoul. Following the Aug. 2 measures, housing prices in Seoul rose 2.8 percent, while prices in other regions rose a mere 0.7 percent.
"If the polarization continues, it will hinder the government's real estate market stabilization policies. It may have to boost the real estate market in the provinces," he said.
Market watchers expect the Moon administration to target those who own multiple homes instead of raising overall property taxes since that would face strong resistance from homeowners.
On top of pressuring demand by raising property taxes, the government plans to stabilize the market by increasing the supply of new homes. The government unveiled its housing welfare roadmap, according to which 1 million homes will be supplied for the next five years through public sector companies such as the Korea Land and Housing Corporation (LH). It especially targets newlyweds, young people and low-income households.
After the government hinted property taxes will be raised on real estate investors, the market is examining various scenarios of the tax revision.
During a briefing on economic policy directives for the next year, Finance Minister Kim Dong-yeon said the government will comprehensively consider diverse factors such as equity in taxation.
"Since tax revision has a huge impact, it is crucial to have a discussion. We will prepare measures after gathering diverse opinions through a special committee," he said.
The official tax hike plan on homeowners is expected to be unveiled in August when the government announces its tax revision plans.
Raising property taxes has been regarded as the government's last hidden card to stabilize housing prices, as it had been cautious about the tax hike. Policymakers have trauma over tax hikes since they witnessed how the 2003-08 President Roh Moo-hyun administration was damaged by "comprehensive real estate tax." The Roh administration, whose ideology the Moon administration has inherited, introduced the tax to curb soaring housing prices, but it ended up losing votes due to strong resistance from taxpayers who criticized it as a "tax bomb."
Since the housing market shows signs of overheating, the administration seems to be left with no option but the property tax hike. Unlike previous administrations which tried to bolster the housing market to pull up economic growth, the Moon Jae-in administration has declared war on real estate speculators. On Aug. 2 it announced real estate stabilization measures, which include levying heavy capital gains taxes on those who have invested in multiple homes on top of restricting mortgages.
However, it failed to curb apartment prices in Seoul. According to Korea Appraisal Board, apartment prices in Seoul rose 3.82 percent between January and November this year, picking up pace from the previous year. Prices rose especially steep in southern districts where high-priced apartments are located.
"There has been polarization between Seoul and provinces following the Aug. 2 measures. Demand has always surpassed supply in Seoul as additional supply of homes is restricted there." said Chae Sang-wook, an analyst at Hana Financial Investment.
He added those who have invested in multiple homes in the provinces seem to be selling them to purchase one good apartment in Seoul instead, further pulling up the apartment prices in key areas of Seoul. Following the Aug. 2 measures, housing prices in Seoul rose 2.8 percent, while prices in other regions rose a mere 0.7 percent.
"If the polarization continues, it will hinder the government's real estate market stabilization policies. It may have to boost the real estate market in the provinces," he said.
Market watchers expect the Moon administration to target those who own multiple homes instead of raising overall property taxes since that would face strong resistance from homeowners.
On top of pressuring demand by raising property taxes, the government plans to stabilize the market by increasing the supply of new homes. The government unveiled its housing welfare roadmap, according to which 1 million homes will be supplied for the next five years through public sector companies such as the Korea Land and Housing Corporation (LH). It especially targets newlyweds, young people and low-income households.
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