DP to lessen real estate tax burdens to stabilize market

May 28, 2021, 09:30 am

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Rep. Kim Jin-pyo, the chair of the ruling Democratic Party’s special real estate committee, announces a plan aimed at stabilizing the real estate market after a plenary meeting of lawmakers at the National Assembly on May 27, 2021./ Photographed by Lee Byung-hwa (photolbh@)

AsiaToday reporters Jo Jae-hak & Park Joon-oh

The ruling Democratic Party (DP) on Thursday decided to extend the benefit of the property tax cut for single home owners, currently available for houses worth 600 million won or less, to houses worth up to 900 million won in order to stabilize the real estate market. For home transfer tax for single home owners, the party proposed to raise the taxation standard to 1.2 billion won from the current 900 million won. In the case of comprehensive estate ownership tax, the party proposed to levy tax on houses with top 2% of government-set home prices.

However, the DP decided to retain the taxation standard of the home transfer tax as well as the Gross Real Estate Tax after holding a public hearing involving the government officials and experts since the pros and cons on the proposal were so clear. The ruling party plans to announce its finalized plans next week after holding a consultation meeting with government officials on Sunday. Experts say nothing is changed about the DP’s real estate policy reform plan, except for extending the benefit of the property tax cut. They predicted that it will not have a significant impact on the market because only 0.05 percentage point property tax reduction will be applied.

The DP’s special real estate committee announced the plan after getting the endorsement from party members at a meeting of its incumbent lawmakers earlier in the day. “We gathered opinions toward easing the burden of property tax on single home owners,” said Rep. Kim Jin-pyo, the chair of the committee. “We decided to retain the taxation standard of the Gross Real Estate Tax and the home transfer tax after holding a public hearing and having consultations with the government and related experts,” he said.

First, the DP decided to apply a reduced tax rate of 0.05 percentage point to the appraisal value range of 600 million to 900 won, and lower it from 0.4 percent to 0.35 percent. The move is aimed at compensating many houses with appraisal value of under 600 million won, which were subject to the special tax rate last year and excluded from the application of the special exception due to a sharp increase in prices. Some 440,000 houses nationwide are estimated to benefit from the tax cut, estimated at about 180,000 won on average per house.

The special committee also suggested a plan to raise the taxation standard of transfer tax to 1.2 billion won from 900 million won for single home owners. As for the comprehensive real estate tax, the committee proposed to change the taxable range to the top 2%. It also reported to the Congress to maintain the current tax standards, but to alleviate the tax burden through supplementary measures such as the payment deferral system.

The DP also decided to preferentially allow modest income families and home buyers in need of housing to borrow up to 20 percentage points more in the loan-to-value ratio than currently permitted. As for house supply measure, the DP will week to distribute some 10,000 units of housing to young people and newlyweds in areas designated by regional governments. A home remodeling project will be also activated in suburban areas, including Bundang and Ilsan.

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