Finance Minister Expects New Measures to Curb Property Speculation


By Kim Jae-kyoung
Staff Reporter



Finance Minister Han Duck-soo holds a diagram showing the tax rise on multiple home owners during a news conference in Kwachon on the outskirts of Seoul, Wednesday. /Reuters-Newsis


The nation’s top economic policy maker said Wednesday that the government’s new anti-speciation measures are expected to bring down home prices in Seoul and its satellite cities by about 11percent.
Housing prices should fall below the October 2003 level, when previous measures were introduced, Finance-Economy Minister Han Duck-soo said during a media briefing.

Home prices in and around Seoul surged by more than 20-30 percent over the last two years.

The package of measures unveiled yesterday involved a hike in ownership and capital gains taxes on owners of multiple homes and supplying more homes in southern Seoul and its satellite cities.

The new anti-speculation measures came as an outcome of two month-long efforts by the government and the ruling Uri Party to create a ``constitution-like’’ real estate policy to curb speculation.

``The new measures are long-term, fundamental steps to help contain property speculation and stabilize home prices. They are not stopgap measures like previous policies,’’ Han said. ``The era of the real estate investment is over.’’

He said that the new policy focuses on collecting speculative capital gains through reforming the taxation system, securing transparency in all transactions and helping those in low-income bracket buy homes.

``With drastic anti-speculation steps, the government will remove the real estate bubble and normalize the market without fail.’’

Under the new anti-speculation measures, the government will drastically raise the tax on those holding more than two homes.

Owners of properties worth more than 600 million won ($583,200) will be subject to the comprehensive, or composite, property tax beginning next year. Currently, the composite real estate tax targets people with homes worth more than 900 million won.

The government will raise the capital gains tax on owners of two houses to 50 percent from the current 9 to 36 percent. Taxes on property holdings, such as apartments and unused land, will be raised to 1 percent by 2019 from the current 0.15 percent.

To offset increases in property holding and capital gains taxes, it plans to lower taxes on real estate transactions between individuals by 1 percentage point to 2.5 percent from the current 3.5 percent.

The government will also increase the number of homes in southern Seoul and its satellite cities in order to resolve the housing supply shortage, one of the key factors behind real estate speculation.

To that end, it plans to supply 45 million pyong in housing sites for the next five years, or nine million pyong per year, in the capital area. One pyong is 3.3 square meters. Under this plan, it will supply a total of 1.5 million new homes by 2010, which comes to 300,000 homes per year.

Also, the government will construct a 2 million pyong (6.6 million square meters) town in Songpa-gu, southern Seoul, to supply 50,000 housing units, which will be on sale in 2008. One pyong equals 3.3 square meters.

Also, the government plans to supply more medium and large housing units (2,600 units) in Pangyo, Kyonggi Province. The apartment in Pangyo will be sold in March and August next year.

The government plans to redevelop 10 million pyong of existing residential areas designated new towns, such as Kimpo and Yangju, to create 140,000 more housing units.

On the demand side, to ensure heavier taxes on wealthy property holders, all property will be marked by their fair market value next year. And, the government also plans to widen the scope of the comprehensive property tax, a progressive tax targeting owners of multiple homes and real estate speculators.

Under the new measures, the assessment base of the comprehensive real estate tax will be raised to 100 percent of the standard price gradually by 2009 from the current 50 percent.

In separate moves to crack down on property speculation, the Financial Supervisory Service (FSS) decided to keep lenders from extending excessive mortgage loans from next month.

The National Tax Service (NTS) said that it started audits against 239 individuals suspected of making speculative investments in Songpa-gu in southern Seoul where the government plans to build a new town.

The tax agency also decided to set up a permanent body to monitor and investigate speculative real estate transactions regularly.

kjk@koreatimes.co.kr