Aim to’catch Seoul votes’ ahead of re-election
Analysis of supply effect limitations due to reconstruction regulations
“Poor policy failure” must overcome some opposition
viewer
The ruling party and the government are reviewing measures to ease the heavy capital gains tax on multi-homed people. Despite the punitive tax system and strong lending regulations, it is interpreted as an intention to temporarily pull out the sale of multi-homeowners in a situation where instability in the trading and cheonsei market is seldom caught. In addition, a fire fell on the foot of the ruling party ahead of the by-election of the Mayor of Seoul and Busan in April. Inside the party, they are cautious about giving a signal to overturn the Moon Jae-in government’s real estate policy. However, experts point out that the market will find stability only when the retreat of multi-homed people is opened in parallel with strong supply regulations such as reconstruction.
According to the Democratic Party, the Ministry of Strategy and Finance, and the Ministry of Land, Infrastructure and Transport on the 10th, plans to ease the transfer tax and policies for multi-homed people in the area subject to adjustment from June are being carefully reviewed within the party. A key official of the party said, “There is a suggestion for deregulation of real estate mainly from the members of the metropolitan area, but it is not enough to come up with a policy alternative that can change the direction of the big frame.”
In this situation, the government expressed the perception that expanding sales is also part of the supply policy. Deputy Prime Minister Hong Nam-gi and Minister of Equipment, said on the same day, “It is an important housing supply policy that the government can pursue to allow multi-homed people who currently have three, four, or five houses to put out their sale.”
viewer
The plan to increase sales by easing the capital gains tax of multi-homed people is a part of the government’s internal consideration since last year. Some members of the ruling party in the metropolitan area also expressed consensus on the necessity to the government in an informal setting. However, it was not put on the table due to concerns that policy coherence could be broken centering on the Party’s core leadership and that the failure of real estate policy could be seen as self-confidence. The ruling party has not been oriented yet, but an analysis suggests that if there is an urgent need for the re-election of the Seoul and Busan mayors, there is a high possibility that the current of change in the policy that squeezes the market will take a sharp turn.
Locked in punitive taxation Only increase in sales
The government significantly strengthened the highest tax rate for multi-homed people last year to 75% for transfer tax (from June this year, 65% for second-homed), 6% for comprehensive real estate, and 12% for acquisition tax. It was expected to lead to market stability. However, market statistics were in a completely different direction from the calculation of tax policy. When the Seoul economy asked 100 economic experts about the prospects of the real estate market this year, 73% predicted that “market unrest will continue”. According to the Korea Real Estate Agency, in November last year, a total of 9,619 apartments were donated nationwide, the second largest ever. Currently, the highest tax rate for multi-homed people is 62% due to the heavy duty of transfer tax, so they would rather endure it or give gifts to their children. Amid the’panic buying’ phenomenon caused by a shortage of supply, the idea of’If you sell it, you can’t buy it again’, there was even a phenomenon of being locked out due to the movement to pass it on as much as possible.
Deputy Prime Minister Hong Nam-ki and Minister of Strategy and Finance appeared on a broadcast on the 10th and said, “It is an important housing supply policy that the government can pursue to sell houses for multi-homed people who currently have three, four, or five houses.” Suggests. Until last year, it is interpreted that if the party was confident that it would have to sell the houses owned by multi-homed people, including Gap investors, due to the strengthened tax, it could open a retreat, such as easing the transfer tax to take out the sale. An anonymous expert said, “It appears to be a move to loosen the skein in real estate ahead of re-election and the end of the term.” “We need to lower excessive regulations and taxes and provide confidence in the supply of housing.”
viewer
■Severe measures will be postponed until the end of the year?
A realistically possible card is a plan to temporarily postpone the heavy duty transfer tax in effect from June to the end of the year or beyond. In addition, the Democratic Party’s Supreme Council member is also considering delaying the timing of implementation so that multi-homed people can definitely put out their products. As the number of tax targets is expanding across Seoul and the tax burden is jumping more than double every year, the ruling party’s metropolitan area lawmakers are making the same voice. It is also possible to apply a special deduction for long-term holdings temporarily in the first half of the year to multi-homeowners who have long-term possession. From December 17, 2019 to June 30, 2020, the government applied an exception to the method of exclusion from the transfer tax in case of selling houses held for more than 10 years in the area subject to adjustment. However, advice comes out that the degree of delay is insufficient and a breakthrough action is necessary even for a temporary period in order to bring a sale to the market. Seo Jin-hyung, president of the Korean Real Estate Association (Professor of Kyungin Women’s University), emphasized that “a plan to reduce it to 50% may be an alternative, but it seems impossible from the current government’s policy philosophy.
Another factor that adds to the burden is that the transaction tax easing is the same as the Moon Jae-in administration’s stance. President Moon Jae-in said at a press conference last year that “the direction of strengthening the holding tax is correct and the easing of the transaction tax is the correct direction in the long run.” According to the National Assembly Budget Office, the ratio of real estate transaction tax to Korea’s nominal gross domestic product (GDP) in 2018 was 1.5%, more than three times higher than the national average of the Organization for Economic Cooperation and Development (OECD) (0.4%).
■Before implementation…the burden of policy retreat
However, it is difficult for some of the party government to recognize that corrections before implementation can give wrong signals to the market. Key members of the ruling party also have a view that it is impossible to intact gains from the transfer of the house price rises. There is no guarantee that sales will spill out and lead to a significant increase in supply to the extent of the deferred measures, which are the levels discussed.
In particular, even before last year’s general election, the ruling party emphasized that it would ease the tax on the one-household tax, led by Lee Nak-yeon, but did not implement the actual action only by shouting slogans. There is also an analysis that this time before the election, it can only be a gesture. Of course, there are many views that some policy changes will follow, as the results of the election for the mayor of Seoul may affect the next presidential election. Dae-jung Kwon, professor of real estate at Myongji University, said, “It is true that the market is stabilized only when the transfer tax is temporarily lowered to normalize transactions.”
Meanwhile, the Ministry of Information and Communication explained through the press release on the day that “we are in-depth reviewing various ideas to provide enough housing that can be afforded to live in the city center, but there has been no review on the plan to ease the transfer tax.” / Sejong = Reporter Hyojeong Park and Jeongwon Hwang Reporter Jongho Song [email protected]
< 저작권자 ⓒ 서울경제, 무단 전재 및 재배포 금지 >