Democratic Party to Decide on Property Tax Reduction Plan... Possible Lowering of 600M-900M KRW 'Cap'

The Increase in LTV for First-Time Home Buyers Is Also a Key Factor

[Image source=Yonhap News]

[Asia Economy Reporters Park Cheol-eung and Jeon Jin-young] The Democratic Party's Real Estate Special Committee will decide on the 20th detailed measures to reduce tax burdens, including adjusting the property tax relief criteria for single-homeowners from a publicly announced price of 600 million KRW to 900 million KRW or less. The committee also plans to discuss increasing the loan-to-value ratio (LTV) for first-time homebuyers and will finalize the measures through a party caucus and government-party consultations next week. However, policies related to comprehensive real estate tax and capital gains tax are expected to take more time.

According to multiple committee officials on the 20th, there is consensus to raise the property tax rate reduction target from the current 600 million KRW to 900 million KRW, with plans to prepare a bill within this month and process it in the next extraordinary session of the National Assembly. Since the property tax assessment date is approaching on the 1st of next month, the committee aims to expedite the process and apply it retroactively from July. The committee will hold a plenary meeting at 2 p.m. that day.

However, the key issue is how to reconcile differences between the government and the party. From the government's perspective, there is a burden in having to revise the property tax relief plan again just six months after announcing it in November last year. Therefore, instead of lowering the tax rate, the government reportedly proposed lowering the previous year's tax burden cap rate for the 600 million to 900 million KRW range, which is currently set at 130%. A committee member said in a phone interview, "Many lawmakers are leaning toward expanding the scope of tax rate reductions, which can have a more definite effect, rather than adjusting the tax burden cap rate," but added, "There is also a possibility of a compromise plan that adjusts both the cap rate and the tax rate."

The measures proposed by the committee may change during detailed negotiations. Former Minister of Justice Choo Mi-ae stated on Facebook that day, "The party and government should pursue policies that steadily raise the effective tax rate on real estate holdings rather than property tax relief," and earlier, Democratic Party lawmaker Jin Sung-jun argued, "Right now, controlling house prices is more urgent than cutting taxes."

The direction to ease the LTV applied to first-time homebuyers among young people and newlyweds without homes has already been set. Currently, for non-homeowners, the LTV is 50% in speculative areas and speculative overheating districts, and 60% in regulated areas, with a 10 percentage point preferential treatment in each case. The plan is to increase this preferential margin further. However, the LTV of 90% mentioned by Democratic Party leader Song Young-gil is considered unrealistic, and the decision is expected to be made at a lower level. There is also talk of lowering the threshold for LTV preferential conditions for couples with a combined annual income of 80 million KRW (90 million KRW for first-time buyers).

The Democratic Party has declared that it will also address comprehensive real estate tax and capital gains tax, but due to the controversial nature of these issues, it is taking a cautious approach. The key question is whether to raise the taxation standard from 900 million KRW to 1.2 billion KRW. A committee official said in a phone interview, "The committee's opinion is that further deferral of capital gains tax surcharges now would be ineffective," and added, "All policies of the committee apply only to single-homeowners. Multi-homeowners are not subject to discussion."

Meanwhile, on the same day, Hong Nam-ki, Minister of Economy and Finance and Deputy Prime Minister, mentioned at a ministerial meeting on real estate market inspection that "It is urgent to eliminate debates and uncertainties regarding possible changes to existing real estate policies." This appears to point out that the various opinions within the Democratic Party regarding real estate measures are causing confusion in the market.

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