|Democratic Party of Korea (DPK) floor leader Kim Tae-nyeon walks inside the National Assembly in Yeouido, Seoul, Thursday. Yonhap|
By Lee Kyung-min
The ruling Democratic Party of Korea (DPK) and the government have been pushing for their plan to impose a hefty tax on foreigners buying homes in Korea for investment purposes, in the latest effort to limit further fallout of nearly two dozen botched real estate policies over the past three years.
The move came as the median price of apartments in Seoul soared by 314 million won ($262,000), or 52 percent, over the past three years, despite ― and precisely due to ― the government's 22nd rounds of real estate policy.
Policies in Singapore, New Zealand and Canada are likely to be taken under review, mostly due to heavier tax on foreigners there unlike Korea where a slew of loopholes have long been exploited by non-Korean investors.
The move picked up speed after DPK floor leader Kim Tae-nyeon said Thursday that foreigners could end up buying most homes made recently available on the market following the government's stricter rules including heavier tax on multiple home owners.
"Singapore, New Zealand and Canada have higher tax rate on transactions of homes bought by foreigners for investment purposes. We will take a closer look into the targeted group of investors to help curb real estate market speculation," he said during a Supreme Council meeting at the National Assembly.
The remark is part of an all-out desperate effort against housing market overheating illustrated in part by a record-high foreign buying of homes, many of which are used as a method of making short-term, windfall gains at the expense of ordinary people feeling increasingly enraged by a reality where their hopes of having a stable place of residence are increasingly becoming a distant dream.
Korea Appraisal Board data showed the number of properties purchased by foreigners for investment purposes stood at 2,090 in June, the highest since 2006 when the organization began compiling related data.
Imposing a hefty acquisition tax should be considered an option, according to Rep. Lee Yong-ho, an independent with no party affiliation.
The journalist-turned-lawmaker sitting on the health and welfare and budget committees recently announced that he plans to introduce a bill seeking to impose a 20 percent acquisition tax on foreign property buyers, similar to a rule already in effect in Singapore and British Columbia in Canada. The bill is expected to be introduced as early as the beginning of August. Rep. Chung Il-young is preparing to put forward a similar bill.
Currently, Korea imposes an acquisition tax of between 1 percent and 4 percent depending on the number of homes bought on all property purchases.
The revised rule announced July 10 seeks to raise the rate to between 8 percent and 12 percent on multiple home owners and corporate bodies owning homes. But no revisions were included to impose heavier tax on foreigners buying homes here.
Myongji University professor of real estate Kwon Dae-jung said raising the rate is a justified course of action, given most other countries do the same.
"Foreign buyers that do not borrow money from Korean lenders are not subject to strengthened restrictions defined by borrowing amounts limited on a loan-to-value ratio and debt-to-income ratio, essentially remaining free to buy real estate anywhere they want without hurdles. A heavier tax on them is needed given other countries tend to be stricter against foreign speculative forces," he added.