[Beginner's Guide to Real Estate] Changing Real Estate Equations in the Year of the Ox... Pre-sale Rights Also Considered Housing, Mandatory Residence for Price Ceiling Housing

Significant Relaxation of Special Supply Income Requirements
Special Supply Available for Households with Annual Income of 100 Million Won

3rd Phase New Town 'Pre' Subscription Also Begins
Mandatory Residence for Houses under Price Ceiling System

Comprehensive Real Estate Tax Rate Raised to Maximum 6%
Increased Capital Gains Tax Rates for Short-term Sales and Multiple Homeowners

Increased Corporate Comprehensive Real Estate Tax and Capital Gains Tax Rates
Rent Reporting System to be Implemented from June

[Asia Economy Reporter Lee Chun-hee] When you become a real estate reporter, you sometimes get unexpected KakaoTalk messages from friends. "How do I apply for a housing subscription?" "What is first priority?" For the 2030 'Burin-i (Real Estate + Beginner)' who only have subscription savings accounts created by their parents when they were young, I am going to create a guide.

The new year of the Year of the Black Rabbit has dawned. Every year, various systems tend to change around January 1st. Last year, the government announced several real estate policies, and this year, various real estate systems have also been newly changed. Changes have occurred across the real estate market, including subscription, taxes, and lease contracts. Today, let's learn about these changed systems.

Increasing Special Supply Income Requirements... From Next Month, 'Actual Residence Obligation' for Price Ceiling Housing

First, let's look at the changes related to housing subscription that Burin-i would be most interested in.

The most noticeable change related to subscription is the relaxation of special supply income requirements. Until now, the income criteria for special supply were too low, making it impossible for households with sufficient income to purchase housing to qualify for special supply, while 'gold spoon' individuals swept up the special supply, leading to criticism.

In response, for newlyweds' special supply, the income requirement for private housing has increased from up to 120% (130% for dual-income) of the previous year's monthly average income by household size of urban workers to up to 140% (160% for dual-income). For public housing, it has been raised from 100% (120% for dual-income) to 130% (140% for dual-income). The lifetime first-time special supply criteria have also been relaxed to 130% or less for public housing and 160% or less for private housing.

However, considering the existing special supply recipients, 70% of the supply quantity will be 'prioritized' to households meeting the existing income requirements, and the remaining 30% will be supplied by lottery to those who meet the increased income requirements and those who failed the prior supply.

Additionally, from the 19th of next month, actual residence obligations will be imposed on housing sold under the price ceiling system in the metropolitan area. Depending on the sale price, residents must live in public land housing for up to 5 years and private land housing for up to 3 years after completion. If moving during the residence obligation period, the house must be sold first to the Korea Land and Housing Corporation (LH) or others. Since it will no longer be possible to resolve the balance by receiving tenants for jeonse (key money deposit) according to the completion time, those aiming for subscription need to plan their finances more carefully.

Perspective view of the 3rd New Town Incheon Gyeyang (Provided by the Ministry of Land, Infrastructure and Transport)

The much-anticipated 3rd generation new town subscription is also coming into view. Although it is a 'pre-subscription,' starting with 1,100 units in Incheon Gyeyang in July, pre-subscriptions for Namyangju Wangsuk, Bucheon Daejang, Goyang Changneung, and Hanam Gyosan districts will be sequentially conducted in September.

Subscription qualifications apply the same criteria as the main subscription regarding income and asset standards. The residency requirement, which grants first priority subscription status after residing in the area for a certain period, allows applications if the applicant is registered as a resident in the area at the time of pre-subscription, but the residency period must be fulfilled by the time of the main subscription. Keep this in mind.

Advance notice of the scheduled move-in date for sale housing is also newly established. Until last year, there was no regulation on when the project owner must notify the move-in date, so some project owners frequently notified a move-in date different from the scheduled date at the time of the recruitment announcement. During this process, residents had difficulties preparing the balance and disposing of their existing homes. To prevent such problems, from this year, project owners must notify the scheduled move-in date at least two months before the actual move-in date and specify this in the supply contract.

Comprehensive Real Estate Tax Rate Raised to a Maximum of 6%... If Selling a House, Sell Before May

The biggest changes this year are undoubtedly in taxes. Overall tax increases are expected for ownership and transactions.

The comprehensive real estate tax rate will be raised to a maximum of 6% starting this year. For owners of two or fewer houses, tax rates of 0.6% to 3.0% apply depending on the taxable standard bracket based on the house price, while owners of three or more houses or two houses in regulated areas will be taxed at rates from 1.2% to 6.0%. Since various property taxes, including comprehensive real estate tax, are levied based on June 1st each year, if you are worried about these tax increases, you should consider selling by May.

Especially, transaction taxes will undergo significant changes after June, so if you are considering selling, you should decide before May. This is because capital gains tax rates for short holding periods or multiple homeowners will increase.

From June 1st, selling a house held for less than 1 year will incur a 70% capital gains tax rate, and houses held for less than 2 years will be taxed at 60%. Considering the general maximum capital gains tax rate is 45%, this is 25 percentage points higher. The additional capital gains tax rate imposed on multiple homeowners selling in regulated areas will also increase by up to 30 percentage points from June.

From January, the long-term holding special deduction for single-household owners will also change significantly. Currently, if you live in the house for more than 2 years, you can get up to an 80% deduction (8% per year) on capital gains tax depending on the holding period, but from this year, the deduction rate is split into holding period (up to 4% per year) and residence period (up to 4% per year), each capped at 40%. For example, if you held a house for 10 years but lived in it for only 5 years, you could get an 80% deduction until last year, but from this year, only 60% deduction applies.

There are also tax relief measures. From this year, single-household owners aged 60 or older (including couples with joint ownership) who have held their house for more than 5 years can receive up to 80% deduction on comprehensive real estate tax by combining an age deduction of 40% and a holding deduction of 50%. This is a 10 percentage point increase from the current maximum deduction rate of 70% last year.

'Tax Saving' Through Corporations Is Now a Thing of the Past

View of Seoul apartments from the 63 Building observatory./Photo by Hyunmin Kim kimhyun81@

As transactions aimed at tax savings through personal and family corporations increased last year, the government is strengthening regulations on real estate transactions by corporations again this year. Previously, individuals were taxed differently based on the price of their owned houses, but corporations are uniformly subject to the highest tax rate. Corporations owning two or fewer houses are taxed at 3%, and those owning three or more houses at 6%. Moreover, corporations lose the basic deduction benefit of KRW 600 million (KRW 900 million for one house), and the 'tax burden cap' to prevent sudden tax increases does not apply.

Also, until last year, capital gains from corporate house sales were included in corporate income and taxed at 10-25%, with an additional 10% tax. From this year, this rate increases to 20%. For example, if the capital gain is KRW 500 million, until last year, individuals were taxed at 40% and corporations at 30% (20% + 10%), but from this year, both individuals and corporations will be taxed at 40%. This aims to eliminate the tax rate difference between individuals and corporations to prevent tax evasion.

Additionally, the lease reporting system, one of the 'Three Lease Laws,' is scheduled to be implemented from June. Similar to the current real transaction reporting system for sales, this system requires mandatory reporting of related contract details within 30 days of the contract, and a fixed date is automatically assigned after reporting. Residential officetels are included, but 'non-residential' properties such as dormitories and goshiwons are excluded.

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