[2021 Economic Policy] Developing Plans to Revitalize Private Rental Housing Using Public-Interest Enhanced 'REITs and Funds'

'2021 Economic Policy Direction'

Rapid Supply of 1.27 Million Housing Units in the Seoul Metropolitan Area Including 3rd New Towns
Review of Long-term Investment Activation Measures

The Democratic Party of Korea and the government have settled on a property tax relief criterion for single-homeowners at "under 600 million won." The major shareholder requirement for stock capital gains tax will be maintained at the current 1 billion won with a grace period. The photo shows the view of Seoul apartments from the observatory of the 63 Building on the 3rd. Photo by Kim Hyun-min kimhyun81@

[Sejong=Asia Economy Reporter Joo Sang-don] To stabilize the housing market, the government plans to rapidly supply 1.27 million housing units in the Seoul metropolitan area through the 3rd New Towns and other projects, while ensuring the smooth implementation of existing jeonse market measures and actively reviewing various housing supply plans. Measures to provide tax benefits for holding stocks over a certain period to encourage long-term investment will also be prepared.

On the 17th, the government held an expanded economic ministers' meeting chaired by President Moon Jae-in at the Blue House and finalized and announced the '2021 Economic Policy Direction' containing these details.

◆Plan to Activate Private Rental Housing with Public Interest Using REITs and Funds= First, the government intends to prepare a plan to activate private rental housing with added public interest to promote the construction of high-quality private rental housing. This will involve the use of REITs and funds. The criteria for excluding construction rental housing from the comprehensive real estate tax aggregation will be lowered from 600 million KRW to 900 million KRW, and the property tax reduction criteria will also be relaxed from 600 million KRW to 900 million KRW in the Seoul metropolitan area. Amendments to the Enforcement Decree of the Comprehensive Real Estate Tax Act and the Local Tax Special Cases Act will be pursued, including separate taxation on public offering dividend income (2 billion KRW · 9%). The property tax reduction criteria will be eased simultaneously.

Additionally, the government plans to manage increased liquidity during crises to prevent it from flowing into asset markets, and to absorb compensation funds for the 3rd New Towns by raising the capital gains tax reduction rate from 15% to 30% when investing in REITs with land compensation rights (代土, Daeto).

◆Review of Measures to Activate Long-term Stock Investment= The government will also review 'long-term investment activation measures' such as providing tax benefits for holding stocks over a certain period. This is in response to concerns that imposing taxes on financial investment income exceeding 50 million KRW from 2023 may increase incentives for short-term investment. Specific details will be studied through research projects next year before the implementation of the financial investment income tax in 2023, and institutional improvement plans will be reviewed.

For government bonds, individual investment bonds will be introduced that provide an additional interest rate of about 30% of the basic interest and tax benefits to investors who hold 10-year and 20-year bonds until maturity.

Along with this, the government plans to induce stable inflow of market funds into the stock market by expanding the base of stock investors and improving stock investment conditions. To this end, it will promote diversification of domestic stock investment scope for pension funds and others, expand the allocation of public offering stocks to general subscribers by additionally allocating up to 5% of the under-subscribed shares from employee stock ownership associations and 5% of the reduced portion of high-yield fund preferential allocation to general subscribers during IPOs, and introduce an equal allocation method that grants equal allocation opportunities to all subscribers who have paid at least the minimum subscription deposit.

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