According to the korean federation, on 23 july, local time, president lee of the republic of korea hosted a three-hour public discussion on national real estate policy, focusing on housing, finance, taxation, etc. The conference sent a clear signal that the korean government was studying a new round of real estate tax reforms。
At present, the korean government has not yet announced its final programme, but many korean media have revealed that if this reform programme finally land, it will become the most important real estate tax adjustment in korea in recent years。
From "six" to "value"
The current real estate tax in korea consists mainly of acquisition tax, holding tax (property tax and consolidated real estate tax) and capital gains tax levied at the time of sale. Among these, the combined real estate tax is mainly imposed on high-value housing and some of the owners of multiple housing units, and is an important policy tool for successive korean governments to regulate the real estate market。
However, new phenomena have emerged in the market in recent years. Some investors circumvent tax policies for multiple housing units by selling ordinary dwellings and holding a single super-high-value dwelling. This phenomenon, known as a “single house”, has created new loopholes in the current tax system。
In response, li indicated that what really needs to be discussed is not just “ownership of a few housing units”, but rather consideration of the use of housing and the value of assets, the distinction between home-based housing and investment housing, and the higher cost of holding high-value housing。
The korean government is working on a comprehensive real estate tax reform, with a plan to introduce a three-tier differential tax policy based on base deduction criteria and high-priced house demarcation lines. The assessment of the gross price (rather than the holding of a condom) for determining whether to increase the tax scheme has become the mainstream option after discussion at a hearing。
Increased housing prices drive policy additions
Since this year, housing prices in seoul and the capital have continued to rise, driven by lower interest rates expectations, improved liquidity and rising stock markets. Although the korean government had previously introduced stricter restrictions on housing loans, including restrictions on capital-cycle mortgage lines and tightening multi-unit loans, market heat had not significantly cooled。
At a public discussion, li indicated that real estate market risks were now accumulating and that the government would take comprehensive measures in a number of areas, including housing supply, financial regulation and tax systems, and would drive necessary reforms even if they entailed political costs。
For a long time, the korean real estate tax system has been characterized by “transactional tax preference and holding tax bias”. The higher tax burden on buying and selling property, while the relatively limited cost of holding it, has led some investors to prefer long-term holdings to wait for appreciation, to the detriment of the flow of housing resources。
As a result, there has always been a reform philosophy in the country that reduces transaction costs modestly, increases the cost of holding, directs more housing to market flows and reduces short-term incentives。
For korea, this is not only a restructuring of real estate policy, but also an important component of fiscal and tax reform。
At present, the korean government has not yet published the final programme of the reform, and the relevant tax rates, tax thresholds and timing of its implementation are still under study and discussion. In the future, whether or not the tax reform will strike a balance between curbing speculation, stabilizing housing prices and safeguarding the residential needs of the population remains to be tested in the market after the policy has been formally introduced。
