|Finance Minister Kim Dong-yeon, second from left, announces the government's measure to curb real estate speculation at a press briefing in Seoul, Thursday. From left are: Land Minister Kim Hyun-mee, Kim, Financial Services Commission Chairman Choi Jong-ku, and National Tax Service Commissioner Han Sung-hee. Korea Times photo|
By Park Hyong-ki
Owners of multiple homes and high-value homes will face heavier taxes and stricter loan restrictions after the government unveiled tougher measures Thursday aimed at curbing real estate speculation especially in the Seoul metropolitan area.
It, foremost, seeks to cool down the real estate market by imposing higher taxes on and further restricting mortgages for anyone who already owns a home, the Ministry of Economy and Finance said.
The government will raise the comprehensive real estate tax rate to 3.2 percent for those who own more than two homes in Seoul and Sejong, an administrative city.
Also, those with a single expensive home have to pay a tax rate of 2.7 percent or more. The range has been increased from 2.5 percent to 3 percent.
In the government's eighth real estate measure since President Moon Jae-in took office in May 2017, the administration raised the rate over the 3 percent imposed by the 2003-08 Roh Moo-hyun government, which then sought to curb rising real estate prices and speculation.
"We have three goals, and they are to stop abnormal speculation once and for all, bring stability to households and boost taxation fairness," Finance Minister Kim Dong-yeon said at a press briefing in Seoul.
He also stressed the incumbent administration will make sure the real estate market is accessible especially to those who really need homes, including young couples and low-income families.
The government has widened the scope of its property ownership taxation.
The comprehensive real estate tax rate ranging from 0.6 percent to 3.2 percent will be applied to anyone who has a property valued at 300 million won or more, according to the minister.
The higher taxation is expected to bring in additional revenue of 420 billion won, up from the government's initial estimation of 300 billion won, the finance minister noted.
"We want to be very clear that we will only use the taxes collected from real estate holdings to further stabilize the market and support households in need," Kim told reporters.
Also, the measure will restrict borrowings by homeowners to the point where it will not allow them to take out another mortgage to purchase a home, the finance ministry said.
For people who seek to borrow, buy and register their apartment with the public rental system, they too will face restrictions.
The ministry said it will reduce the loan-to-value (LTV) ratio to 40 percent from the current 60 percent to 80 percent, restricting the amount of a mortgage they can get in accordance with the value of the house they seek to purchase.
Previously, they did not face such regulations, but enjoyed benefits such as lower capital gains taxes and relaxed screening for bank loans.
The government intended to increase the supply of houses and apartments through registration with the public rental housing system to bring down real estate prices by offering benefits.
However, it did not create the effect it wanted, but saw an increase in borrowing and misuse of the system by owners of multiple homes who were only interested in boosting their property assets.
Kim said the ministry will announce follow-up measure aimed at boosting the housing supply, September 21. This will include a plan to relax rules governing Seoul's greenbelts so that apartments can be built in the areas to further cool down the city's home prices.
Analysts say the new regulations seem no different from previous real estate measures.
"It seems to be the same in that the government wants to control the real estate market through taxes. It did not work during the former Roh administration," said Kwon Dae-jung, a professor at Myongji University's Graduate School of Real Estate Studies.
"The very big difference from previous measures is it will be regulating the homes of mid-income earners. This could cause a shock in the short run."
Analysts say the government has so far not come up with effective measures, considering this is the eighth one seeking to rein in real estate prices and household loans and mortgages.
Despite the flurry of regulations, apartment prices in Seoul have risen at a fast pace.
In the first week of this month, they rose 0.47 percent on average, up from 0.45 percent at the end of August and 0.11 percent in July, according to the finance ministry.
Prices have been rising especially after Seoul Mayor Park Won-soon's early announcement of development plans for Yeouido and Yongsan, which have since been rescinded.