[Weekly Review] Announcement of Property Tax Relief for Mid-Low Priced Single Homes... Q3 GDP Growth Rate at 1.9%

3rd Quarter GDP Growth of 1.9%... "Difficult to See as a V-Shaped Recovery"
September Industrial Activity Trends Show 'Triple Increase' in Production, Consumption, and Investment

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The ruling party and government will soon announce measures to ease the property tax burden on low- to mid-priced single-home owners following the push to realize the actual value of real estate official prices. South Korea's economic growth rate rebounded to 1.9% in the third quarter, supported by automobile exports. This marks a return to positive growth after six consecutive months of negative growth.

◆Easing property tax for low- to mid-priced single-home owners... announcement soon= The ruling party and government are preparing measures to ease the property tax burden on low- to mid-priced single-home owners. As the official price, which serves as the basis for property tax assessment, rises, they plan to lower the property tax rate to prevent low- to mid-priced homeowners from facing a tax bomb. On the 28th, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, stated at the real estate market inspection meeting held at the Government Seoul Office, "The roadmap for realizing the actual value of official real estate prices based on the Real Estate Official Price Act will be announced soon," adding, "We plan to ensure that the property tax burden on low- to mid-priced single-home owners does not increase." Currently, the ruling party and government are considering expanding the property tax reduction target to homes priced below 900 million KRW. They are also considering lowering the current property tax rate, which ranges from 0.1% to 0.4% depending on the tax base, by 0.05 percentage points. The ruling party and government are pushing to raise real estate official prices to 90% of market prices by 2030. This has raised concerns that the tax burden on low-income households will increase.

◆3rd quarter GDP 1.9%... transition to positive growth= The Bank of Korea announced on the 27th that the preliminary real gross domestic product (GDP) growth rate for the third quarter of this year was 1.9% compared to the previous quarter. The growth rate recorded negative figures for two consecutive quarters, with -1.3% in the first quarter and -3.2% in the second quarter. Notably, the second quarter growth rate was the lowest in 11 years and 6 months since the fourth quarter of 2008 (-3.3%) during the financial crisis. Although the base effect from the negative growth in the second quarter played a role, the rebound in the third quarter allows expectations for economic recovery in the second half of the year. Quarterly real gross domestic income (GDI) increased by 2.5% due to improved terms of trade. Real GDI exceeded real GDP growth. An increase in GDI implies improved corporate profitability, which can lead to increased consumption and investment, and positively impact employment. The government also evaluated that the economy has entered a recovery trajectory toward normalization. However, the Bank of Korea expressed a view that it is difficult to call this a 'V-shaped rebound.' Park Yang-su, Director of the Economic Statistics Bureau at the Bank of Korea, explained, "It is still premature to say this is a V-shaped rebound," adding, "While goods exports have recovered to last year's levels, service exports are still recording negative figures." He further added, "Looking at GDP by economic activity, manufacturing sharply declined in the second quarter but has largely recovered, whereas the service sector's recovery remains very slow."

◆September production, consumption, and investment 'triple increase'... export recovery and Chuseok effect= Production, consumption, and investment all increased simultaneously in September. This triple increase is the first in three months since June. Despite the impact of COVID-19, production increased due to export recovery, and consumption rose due to the Chuseok holiday effect. According to the 'September Industrial Activity Trends' released by Statistics Korea on the 30th, total industrial production last month increased by 2.3% compared to August, driven by growth in manufacturing, services, and construction. Kim Bo-kyung, Director of Industrial Trends at Statistics Korea, said, "Total industrial production decreased by 0.8% in August but rebounded in September due to improved exports." She added, "The increase in automobile production, which has significant upstream and downstream effects, had a large impact." Retail sales, which indicate consumption, rose by 1.7% compared to the previous month, with durable goods such as passenger cars decreasing by 0.7%, but non-durable goods like food and beverages increasing by 3.1%, and semi-durable goods by 1.5%. Facility investment also increased by 7.4% compared to the previous month, driven by a 34.3% increase in investment in transportation equipment such as ships.

Accordingly, the coincident index cyclical component rose by 0.3 percentage points compared to the previous month, and the leading index cyclical component, which predicts future economic conditions, increased by 0.4 percentage points.

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