By Kim Jae-kyoung
Staff Reporter

President Roh Moo-hyun Monday reaffirmed his commitment to eliminating real estate speculation and made it clear that the government will recollect excess capital gains by speculators.

At a meeting of senior presidential secretaries at Chong Wa Dae, Roh said that his administration will press ahead with a three-point principle in real estate policies: transparency in all transactions, collection of speculative capital gains and expansion of the role of the public sector in supply of homes.

Chung Moon-soo, senior presidential secretary for economic affairs, quoted Roh as saying, ``All real estate transactions should be made in a transparent manner and excess speculative capital gains should be collected.’’

Roh also called for the secretariat to take steps to expand the role of the public sector in increasing the number of homes.

Roh said the current upward spiral in property prices is not because of the lack of appropriate steps, but because of ``wrong practices and customs’’ in the market.

``It’s not like there are no answers to real estate problems. Policies are not taking effect because there are vested interests and wrong customs in the market.’’

In the latest step to fight speculation, the government has decided to expand its tax audit into real estate speculators nationwide as property speculation has spread throughout the nation despite its earlier anti-speculation measures.

It has planned to push ahead with the construction of new cities around Seoul and the redevelopment of Kangbuk, a relatively underdeveloped area north of the Han River, to control the heated real estate markets.

The National Tax Service (NTS) said yesterday that it will conduct tax audits on 266 out of 13,129 apartment complexes nationwide in speculation-prone areas, starting next Monday.

The 266 complexes include Changwon in South Kyongsang Province, Pundang and Yongin in Kyonggi Province, and Kangnam, the most expensive area in the country south of the Han River in Seoul.

The tax agency will track the real source of funds and crack down on the false reporting of capital gains made from real estate trading in the speculation areas.

The government plans to designate any provincial areas showing signs of speculation as a speculation zone where capital gains are taxed based on market prices, higher than tax standard rates.

It also plans to raise tax standard rates of housing prices in the designated regions. The tax standard rates, which are used to assess property taxes, are equivalent to around 80 percent of actual real estate prices.

At an economic forum yesterday, Finance-Economy Minister Han Duck-soo also said that the government will employ all possible measures in both demand and supply to crack down on real estate speculation.

``A rise in real estate prices in southern Seoul and some of its satellite cities are triggered more by speculative demand than real demand,’’ Han said. ``To control this fictitious force, we will maintain our policy to suppress demand in the region.’’

``It is necessary to maintain a demand-controlling policy from 2010 to 2012 when the housing supply rate reaches over 110 percent, to prevent excess capital gains in some regions,’’ he added.

The top economic policymaker said the government will also map out comprehensive measures on the supply side.

``For sustainable economic growth, it is essential to secure stabilization of people’s livelihood and social integration among people,’’ he said.

``In order to reduce living costs, the government will push for the increase of housing supply through the construction of new towns and redevelopment of the Kangbuk region,’’ he added.

But Han said the government will not employ interest rate policies to curb property speculation because a marginal rate increase may hurt the economic recovery.

Market analysts said that to control property speculation, the government should focus more on increasing home supply through the construction of new towns than on reducing demand through heavier taxation.

``Urban renewal and new city development will increase housing supply, which makes housing affordable,’’ Morgan Stanley senior economist Andy Xie said

``Housing is the key to the health of the economy and speculation can drive up prices and damage living standards,’’ he added. ``The solution is to increase supply.’’