Speculation Blocked with Partial Loan Regulation Easing... Supply Measures Remain Unchanged

Cabinet Reshuffle and Ruling Party Leadership Formation Expected to Initiate Discussions on Comprehensive Real Estate Tax and Others

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Moon Chaeseok] After the April 7 by-elections, the original supply measures will be maintained, but some loan regulations are expected to be eased. The regulatory relaxation is being prioritized for actual demanders such as young people and first-time homebuyers. After the cabinet reshuffle and the ruling party leadership appointments are completed, tax policies such as property tax and transaction tax are expected to be closely examined.

According to government officials and the Democratic Party of Korea on the 11th, a behind-the-scenes review of the government's existing real estate policies has begun following the April 7 by-elections. A government official said, "The overall framework of the existing real estate policy to stabilize the real estate market and expand housing supply will be maintained, but that does not mean that none of the existing policies will be changed," adding, "We will go through a process of carefully reviewing the various opinions raised around the election." A Democratic Party official also said, "We feel the need to eventually review the entire existing real estate policies, including finance and taxation, as a package," but "for now, we plan to first organize tasks such as the reorganization of the party leadership and then discuss further."

Since public sentiment regarding the existing real estate policies was confirmed through the April 7 by-elections, it is interpreted to mean that some level of modification and supplementation of the existing policies is inevitable. On the day after the election, April 8, Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki held a meeting with related ministers to inspect the real estate market, stating, "We must maintain the overall framework of the existing real estate policies without wavering," but also, "We will review the intentions behind the various opinions raised so far," which is a statement made in a similar context.

The government plans to maintain supply measures such as the February 4 plan. Supply is considered the biggest tool to stabilize the real estate market, and there is a sense of crisis that if this wavers, the entire market could be lost. It is reported that the easing of loan regulations controlling liquidity has already progressed considerably, focusing on actual demanders. These loan regulation easing measures are expected to be announced within this month as part of the household debt management plan.

Policy discussions are expected to shift toward taxation such as property tax and transaction tax, which are core to the Moon Jae-in administration's real estate policies. A key Democratic Party official said, "Although it is difficult due to the impact on existing policies, there is a considerable opinion that tax policies such as the comprehensive real estate holding tax should be eased to some extent," adding, "However, no discussions have taken place yet, and the direction will emerge after future discussions." The representative real estate policies of the current administration include strengthening holding taxes such as the comprehensive real estate holding tax on multi-homeowners and short-term traders, and imposing heavy transaction taxes such as capital gains tax.

The most likely option being discussed inside and outside the ruling party is easing the comprehensive real estate holding tax for single-homeowners. Since one out of six homes in Seoul is already subject to the comprehensive real estate holding tax, raising the tax base of 900 million KRW for the comprehensive real estate holding tax or postponing the scheduled increase in the tax rate this year (from 0.5~2.7% to 0.6~3.0%) are being considered. Increasing the deduction rate for those who have lived in their homes for a long time is also presented as a strong alternative. Easing or postponing the capital gains tax surcharge policy, which recovers up to 70% of short-term trading profits, is also a possible option.

However, there is also a significant view that tax policy is part of the 'big framework' of existing real estate policies that the current administration cannot concede. If this framework is shaken, trust in the existing real estate policies will collapse, and the real estate market, which has barely stabilized, could be shaken again. An official from a private research institute said, "Regarding real estate taxation, I believe the point of no return has already passed," adding, "Minor adjustments are possible, but within the framework of the Moon Jae-in administration, modification or supplementation is not feasible." A government official explained, "Sensitive issues such as taxation can only be discussed after the new ruling party leadership is installed and the cabinet reshuffle is settled," adding, "Currently, discussions have not started, and we are watching other situations."

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