Regulatory Easing and Housing Price Stability: Democratic Party Wavers, Increasing Confusion

Discussion on Real Estate Policy Improvement After Election Defeat
Reducing Comprehensive Real Estate Tax and Property Tax, Easing Loan Regulations
Criticism for Lack of Consistent Direction
Lowering House Prices but Saying 'Buy a House with a Loan'
Conflicting Signals... Even Rental Business Operators Oppose

[Asia Economy Reporter Moon Jiwon] The Democratic Party of Korea decided to improve its real estate policy following its crushing defeat in the Seoul mayoral by-election, but critics argue that inconsistent directions and an approach focused solely on next year’s presidential election are fueling market confusion. Experts advise that while some deregulation is necessary given the public’s strong anger toward existing real estate policies, a meticulous approach is required to avoid stimulating housing prices or sparking fairness controversies.

According to the real estate industry and political circles on the 28th, the Democratic Party held its first real estate special committee meeting the day before and began serious discussions on reforming real estate policies. Representative measures include easing the loan-to-value ratio (LTV) and debt-to-income ratio (DTI) for mortgage loans to housing-vulnerable groups such as the homeless, and adjusting the property tax exemption ceiling for one-homeowners from 600 million KRW to 900 million KRW. Reduction of tax benefits for rental business operators and cuts to the comprehensive real estate holding tax are also expected to be discussed.

The easing of loan regulations and reduction of holding taxes run counter to the government’s previous real estate policies. The ruling party and government had repeatedly strengthened real estate loan regulations such as LTV and increased the burden of property tax and comprehensive real estate tax through multiple measures. However, after public anger over real estate policies was confirmed in the recent Seoul mayoral election, they abruptly changed direction. As a result, voices within the Democratic Party have become divided, intensifying confusion.

A prime example is the easing of the comprehensive real estate tax. Initially, to appease the angry public sentiment, the possibility of tax burden relief was hinted at, but without a clear direction, the stance has been reversed multiple times from ‘easing’ to ‘suspending discussions’ to ‘future discussions’ and then ‘re-discussion.’ In fact, until the day before, the Democratic Party had placed comprehensive real estate tax relief as a lower priority in deregulation, citing opposition from hardliners within the party, but as criticism grew fierce, they hastily brought the issue back to the reform discussion table.

Approaching sensitive tax issues lightly due to political calculations such as elections has only increased market confusion. Office worker A said, “The comprehensive real estate tax assessment date is June 1, but even if I put my house on the market now, it’s impossible to dispose of it before then,” adding, “Should I just trust the wavering words of politicians and wait?”

Unhojung, Emergency Committee Chair of the Democratic Party of Korea, and Jin Sun-mi, Chair of the Special Real Estate Committee, are attending the 1st meeting of the Special Real Estate Committee held at the National Assembly Members' Office Building on the 27th. Photo by Yoon Dong-joo doso7@

The easing of loan regulations is similar. Since housing prices have surged since the Moon Jae-in administration took office, many argue that easing loans for actual homebuyers is necessary to increase opportunities for homeownership, but there are concerns about a short-sighted approach. Given that President Moon Jae-in announced a policy last year to ‘restore housing prices to their original state,’ easing loans before housing prices stabilize could inadvertently burden young people with a ‘debt bomb.’ On the other hand, the market is receiving conflicting signals simultaneously, with claims that “housing prices are stabilizing” while also urging “take out loans and buy houses.”

Cho Joohyun, emeritus professor of real estate at Konkuk University, said, “Since housing prices have become so high, many young actual buyers who want to purchase homes are suffering significant damage, so loan easing seems necessary,” but added, “Since increased loans could stimulate housing prices, precise planning is required.”

Regulations on rental business operators are no different. The Democratic Party initially encouraged the rental business system to stabilize the rental market early in its administration, but after housing prices surged, it pointed to these operators as a cause of price increases and is now reducing their benefits. The Korea Landlords Association protested, saying, “We cannot help but suspect an intention to shift the public’s resentment?caused by real estate policy failures, rising housing prices, increased official property prices, and the resulting tax bomb?onto us.”

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