[7·10 Real Estate Measures] This Target Also Multi-Homeowners... Registered Rental Business Virtually Abolished

6·17 Real Estate Follow-up Measures

Capital Gains Tax Surcharge Rate for Multiple Homeowners Increased by 10%P

Acquisition Tax Reduction for Properties Under 150 Million KRW

Burden Eased for Actual Buyers and First-Time Home Purchasers

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is announcing a comprehensive real estate policy including strengthening the comprehensive real estate holding tax for multi-homeowners on the 10th at the Government Seoul Office in Jongno-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporters Joo Sang-don (Sejong), Jo Kang-wook, Jang Se-hee, Lee Chun-hee] The government's key target in the '6.17 Real Estate Follow-up Measures' announced on the 10th to stabilize housing prices is multiple homeowners. By raising the comprehensive real estate tax (종합부동산세, 종부세) top rate to 6%, the government aims to increase the tax burden on multiple homeowners, encouraging them to put their properties on the real estate market. Additionally, seeing that excessive benefits for rental business operators fuel speculation, the government plans to fundamentally reform the rental business operator system.

On this day, the government, in a joint announcement with the Ministry of Economy and Finance and the Ministry of Land, Infrastructure and Transport, released the 'Housing Market Stabilization Management Plan' containing these details. This is the 22nd measure introduced under the Moon Jae-in administration as a follow-up to the 6.17 real estate measures.

◆ Increased Burden on Multiple Homeowners Including 종부세 Hike = The government decided to raise the top 종부세 rate to 6%. Currently, the 종부세 rate ranges from 0.6% to 3.2%, with the highest rate applied to properties exceeding 9.4 billion KRW; this will be increased to a range of 1.2% to 6.0%. Following the 6.17 measures, housing-holding corporations will also be subject to the individual top tax rate, meaning multiple-homeholding corporations will face the highest surcharge rate of 6%.

The government had planned to raise the 종부세 rate up to 4.0% in the December 16 measures last year but failed to pass the National Assembly. However, after the 6.17 announcement, nationwide apartment prices rose for three consecutive weeks, and Seoul's weekly apartment prices increased by 0.11%, marking the highest rise in seven months since the December 16 measures. This accelerated related discussions. Initially, the ruling party and government considered three options to raise the top 종부세 rate to 4.5%, 5%, or 6%, and ultimately decided on the highest rate to align with the ruling party's emphasis on a 'real 종부세 that speculative forces fear.'

If a property is bought and sold within less than two years for capital gains, or if multiple homeowners sell properties in regulated areas for capital gains, capital gains tax will be surcharged. The tax rate for sales within one year will increase from 40% to 70%, and for sales within two years, a basic rate of 60% will apply. However, this will be deferred until June 1, 2021, the 종부세 imposition date next year, to encourage sales.

The capital gains tax surcharge rate for multiple homeowners in regulated areas will increase by 10 percentage points. For two-homeowners, a 20 percentage point surcharge applies; for three or more homes, a 30 percentage point surcharge applies on top of the basic rate (6% to 42%). Acquisition tax burdens for multiple homeowners and corporations will also increase. For individuals, 8% applies for two homes, 12% for three or more homes, and 12% applies for corporations.

◆ Tax Benefits for 4-Year Short-Term and 8-Year Long-Term Apartment Rental Businesses Abolished = The government will abolish tax benefits for 4-year short-term rental and 8-year general long-term apartment rental business operators. However, the mandatory long-term rental period will be extended from 8 to 10 years to strengthen public obligations. Until now, the government granted tax reductions to rental business operators who complied with the 4- and 8-year mandatory rental periods and limited rent increases to within 5%. The reduction of tax benefits for existing rental business operators effectively amounts to retroactive application.

Existing properties falling under the abolished categories will have their registrations automatically canceled immediately after the rental obligation period expires. If voluntary deregistration is desired before the rental obligation period ends, voluntary deregistration will be permitted.

The government will regularize joint inspections to ensure compliance with rental obligations, rent increase restrictions, and lease contract reporting. Violations will result in fines, deregistration of rental business operators, and recovery of tax benefits.

◆ Burden Eased for Actual Buyers and First-Time Home Purchasers = The measures also include many steps to reduce burdens on low-income and actual buyers. First, the scope and supply ratio of special allocations for first-time homebuyers will be expanded. The special allocation ratio for first-time buyers of national housing will increase from 20% to 25%, and for private housing under 85㎡, 15% of supply in public housing sites and 7% in private housing sites will be allocated. Income criteria for newlyweds among first-time buyers will also be relaxed. For newlyweds in special towns priced over 600 million KRW, eligibility will expand to 130% of the average monthly urban worker income (140% for dual-income households), and the same income criteria will apply to private housing priced over 600 million KRW. Acquisition tax will also be reduced. For first-time homebuyers, acquisition tax is exempted for homes under 150 million KRW and reduced by 50% for homes under 300 million KRW (400 million KRW in the metropolitan area).

Regarding balance loans, an exception clause applies to apartment buyers in areas newly designated as regulated under the 6.17 measures, allowing them to apply the previous loan-to-value (LTV) ratio for mortgage loans. This means that if an apartment was purchased before the 6.17 announcement but the area was later designated as regulated or the regulation threshold increased, lowering the LTV for balance loans, the previous LTV will be applied as relief. Due to this, apartment buyers in Incheon’s Geomdan and Songdo, which were non-regulated areas but designated as speculative overheated districts under this measure, faced confusion due to reduced balance loan limits but will now be able to apply the previous 70% LTV. However, multiple homeowners can only take balance loans within the scope of loans obtained before the designation or change of regulated areas.

Additionally, income criteria for 'low-income and actual buyers' who receive a 10 percentage point preferential treatment on LTV and debt-to-income ratio (DTI) in regulated areas will be relaxed. Accordingly, the current criteria of combined spousal annual income of 60 million KRW or less (70 million KRW or less for first-time buyers) in adjustment target areas and speculative districts/speculative overheated districts, and 70 million KRW or less (80 million KRW or less for first-time buyers) will all be raised to 80 million KRW or less (90 million KRW or less for first-time buyers). The balance loan relief and income criteria relaxation measures will take effect from the 13th.

This content was produced with the assistance of AI translation services.