Ultra-Strong Real Estate Measures Released... Government "Preparing Countermeasures for Gift Tax Side Effects"

Follow-up Measures to the July 10 Plan... Formation of the 'Housing Supply TF'

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] Taxes related to real estate for multi-homeowners are set to increase one after another. The comprehensive real estate holding tax rate will rise from the current maximum of 2.7% to 6.0%, and the capital gains tax surcharge rate for owners of three or more homes will increase from 62% to 72%. Additionally, the government plans to prepare supplementary measures in anticipation of a potential increase in gift giving.

According to the Ministry of Economy and Finance, the Ministry of Land, Infrastructure and Transport, and the Ministry of the Interior and Safety on the 12th, the government plans to establish additional measures addressing the side effects of gift tax within this month as a follow-up to the '7·10 Measures'. A government official stated, "We are considering side effects such as gift giving occurring as people forgo capital gains when the difference between gift tax and capital gains tax disappears," and added, "We will review and announce related measures."

The comprehensive real estate holding tax will be doubled, mainly targeting multi-homeowners. The tax rates for owners of three or more homes and two homes in regulated areas will increase from the current 0.6?3.2% to 1.2?6.0%. If the property is resold within one year, the capital gains tax rate will be raised from the current 40% up to 70%.

The registration system for 4-year short-term rental and 8-year long-term apartment rental housing will be abolished, withdrawing tax benefits. However, long-term rentals for villas and similar properties will be maintained, but the mandatory rental period will be extended from 8 years to 10 years.

Due to the abolition of the system, it will no longer be possible to newly register apartments as long-term rentals or convert existing short-term rentals into long-term rentals. Existing rental housing registrations will be automatically canceled once the mandatory rental period expires. If voluntary cancellation is desired before this period ends, it will be allowed after reviewing compliance with public obligations. The recovery of tax benefits will not be applied retroactively.

Although the government and ruling party have stated that they will significantly raise the comprehensive real estate holding tax rate to curb multi-homeowners and speculative forces, it is questionable whether this will actually stabilize housing prices or increase listings. The comprehensive real estate holding tax is already based on the tax standard date of this year (June 1), so the current tax law applies to this year's taxes. Because the announcement timing and imposition timing differ, it is unclear at which point homeowners will put their properties on the market.

Yoon Jihae, senior researcher at Real Estate 114, analyzed, "Since it does not apply to this year's tax law, it is unclear at which point sales will occur," adding, "There will be no market impact in the second half of the year." She further noted, "The rental market is also unstable, and Seoul subscription rates show competition ratios of 100:1, so the market outlook for the second half is not bad," and predicted, "Rather than immediately putting properties on the market, owners will wait and likely list them in the first half of next year."

Professor Shim Gyo-eon of Konkuk University’s Department of Real Estate said, "When real estate measures are announced, they may immediately be reflected in market prices, but prices may fluctuate again depending on future supply and demand." Regarding the abolition of benefits for rental business operators, he said, "If rental supply decreases, prices will eventually rise or supply will shrink, which is unfavorable for ordinary citizens."

Meanwhile, the government plans to form a 'Government-wide Task Force for Expanding Housing Supply' chaired by the Deputy Prime Minister for Economy to devise fundamental plans for expanding housing supply.

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