Short-term Land Holding Capital Gains Tax Rate Up to 70%... Mandatory LTV Regulation and Submission of Financing Plans (Comprehensive)

Deputy Prime Minister Hong Nam-ki Announces Measures to Eradicate Real Estate Speculation and Prevent Recurrence
Up to 1 Billion KRW Reward for Reports Received Over 100 Days

Deputy Prime Minister for Economy Hong Nam-ki is announcing the results of the 7th Fair Society Anti-Corruption Policy Council on eradicating real estate corruption at the Government Seoul Office on the 29th. Photo by Kim Hyun-min kimhyun81@

[Sejong=Asia Economy Reporters Kim Hyunjung and Jang Sehee] The government has decided to raise the capital gains tax rate on short-term held land to a maximum of 70% to prevent land speculation and significantly expand the scope of property registration obligations for public officials. Additionally, a 100-day intensive reporting period will be operated, offering rewards of up to 1 billion KRW, reaffirming a strong commitment to root out speculation. The government will also strengthen financial management by mandating the submission of funding plans when acquiring land above a certain scale.

On the 29th, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, announced the "Measures to Eradicate Real Estate Speculation and Prevent Recurrence" after the Anti-Corruption Policy Council chaired by President Moon Jae-in at the Government Seoul Office. He stated, "While preparing measures to eradicate real estate speculation and prevent recurrence, the government reviewed laws, systems, culture, and behaviors from the ground up, encompassing all conceivable measures and conducting a comprehensive review." The goals of this plan include ▲ thoroughly rooting out and institutionalizing measures to prevent real estate corruption such as speculation from taking hold ▲ transforming public institutions related to real estate such as LH to be reborn ▲ and firmly restoring public trust in real estate policies.

◆ Capital Gains Tax Surcharge Rate Increased by 20 Percentage Points... Funding Plan Submission Also Mandatory = The government plans to lower speculative transaction profits by strengthening taxation and related systems, while significantly expanding the scope of mandatory property registration for public officials to block speculation at its source.

First, to block incentives for speculative land transactions, the government will raise the capital gains tax surcharge rate by 10 to 20 percentage points starting next year for land held for less than two years and non-business-use land. Accordingly, the capital gains tax rate for land held less than one year will increase from 50% to 70%, and for land held between one and two years, from 40% to 60%. The surcharge rate on non-business-use land transfers will increase from 10 percentage points to 20 percentage points. The existing system that exempted capital gains tax surcharges for land designated for public projects by considering it as business-use land will be abolished. However, for land already held, the recognition requirement will be strengthened from '2 years before' to '5 years before' the official announcement date of the project recognition.

To prevent speculative funds from flowing into land, the government will introduce Loan-to-Value (LTV) regulations on all non-housing secured loans across all financial sectors for households. Submission of funding plans will also be made mandatory when acquiring land above a certain scale to be used as data for determining speculation. Financial institutions will notify a newly established dedicated real estate transaction analysis organization of suspicious land-backed loans above a certain scale to block indiscriminate land speculation through loans.

◆ All LH and SH Employees Must Register Real Estate Property = The property registration system, currently focused on senior officials at grade 4 or above, will be expanded to include all public officials. All employees working in real estate-related ministries and public institutions such as land development and housing construction must register their properties, and all employees of institutions dedicated to real estate work such as LH and Seoul Housing & Communities Corporation (SH) must register their properties. As a result, the number of public officials subject to property registration is expected to increase by about 70,000 from the current approximately 230,000.

Considering the time required to build the property registration system, the government plans to start with real estate registration in the first phase this year, and then gradually proceed with other assets such as financial assets in the second phase after the registration system integrated with the financial information inquiry system is fully established.

A "restriction on new real estate acquisition" within the jurisdiction related to the duties of public officials handling real estate-related work will also be introduced. Exceptions such as acquiring one house for the homeless, inheritance, and unavoidable acquisitions like funerals must be reported to the head of the affiliated institution before acquisition. Legislation on the "Public Officials Conflict of Interest Prevention Act," which prohibits the use of confidential information by public officials and imposes severe penalties for violations, will also be pursued.

Furthermore, a Real Estate Transaction Analysis Institute will be established to monitor abnormal transactions in the real estate market. A speculation reporting center will be set up to operate a 100-day intensive reporting period immediately, offering rewards of up to 1 billion KRW for reports. However, incentives such as exemption from aggravated punishment for voluntary reporting will also be provided. A registration system will be introduced for real estate sales businesses, and in addition to person-centered investigations, parcel-centered planned investigations will be conducted.

◆ Employment Restrictions, Fivefold Recovery, Opportunity Denial... Strong Punishment Measures = For the four major disruptive acts in the real estate market?insider trading, price manipulation, illegal brokerage, and illegal resale?employment in related institutions will be restricted, and up to five times the unfair profits will be recovered. In cases of illegal resale of pre-sale rights, even intentional buyers will be punished, and they will be denied chances to win housing subscription for the next 10 years. Excessively planted trees aimed at compensation will be excluded from compensation, and if suspicion of speculation is confirmed, agricultural loss compensation and relocation compensation will be excluded. Particularly strong measures will be applied to agricultural land speculation, imposing immediate disposal obligations.

In addition, all LH employees will be required to register their properties with the Ministry of Personnel Management, similar to senior public officials, and new real estate acquisitions will be basically restricted except in exceptional cases. Real estate transaction details will be regularly investigated annually, and if speculation using undisclosed information is detected, severe disciplinary actions such as dismissal or expulsion will be taken. LH employees will be excluded from land-for-land compensation or land supply targets instead of cash compensation. Speculators who triggered this incident will have their gains recovered to the maximum extent, and agricultural land will be subject to compulsory disposal obligations.

Deputy Prime Minister Hong expressed deep remorse and apology regarding this incident, emphasizing, "Land embodies the spirit of publicness in the Constitution, and housing is not just something to buy but a place to live." He added, "Speculative profiteering is the most serious social crime that diminishes the motivation and causes frustration among the majority of ordinary citizens, youth, and homeless people who work honestly in their daily lives and employment battles." He stressed, "Taking this incident as an opportunity, we will strongly implement systemic eradication measures to root out real estate corruption and impose stricter standards and responsibilities on public officials."

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