The Democratic Party to Reduce Property Tax Rate by 0.05%P for 600 Million to 900 Million KRW Range... Comprehensive Real Estate Tax and Capital Gains Tax Postponed (Summary)

Property Tax Reduction Confirmed
Non-homeowners and Actual Buyers' LTV Preferential Rate Increased from 10% to 20%P
Capital Gains Tax Threshold Raised from 900 Million to 1.2 Billion KRW, Comprehensive Real Estate Tax on Top 2% Assessed Value Deferred

[Asia Economy Reporter Oh Ju-yeon] The Democratic Party of Korea has confirmed as party policy a plan to reduce the property tax rate by 0.05 percentage points for houses with a publicly announced land price between 600 million and 900 million KRW. However, no conclusion was reached on easing the comprehensive real estate tax and capital gains tax, which had significant differences between the party and government, and these will be reconsidered in June. Although the party policy was not finalized on that day, it is noteworthy that the special committee emphasized easing capital gains tax and comprehensive real estate tax in its proposal.

Yoon Ho-jung, floor leader of the Democratic Party of Korea, is attending and speaking at the policy members' meeting on real estate held at the National Assembly on the 27th. Photo by Yoon Dong-ju doso7@

Property Tax Reduction... 440,000 Households with 600M-900M KRW Homes, Average 180,000 KRW Reduction

On the 27th, the Democratic Party's Real Estate Special Committee (Real Estate Special Committee) announced the 'Supply, Finance, and Tax Improvement Plan for Housing Market Stabilization' immediately after the policy members' meeting, adopting the property tax relief plan as party policy without significant opposition, as consensus had been formed within the party.

The special committee finalized a plan to apply a 0.05 percentage point reduction in property tax rates for houses with publicly announced prices between 600 million and 900 million KRW. There are a total of 440,000 such houses nationwide, and the average tax reduction per house is estimated to be 180,000 KRW. This is a further easing about six months after the property tax reduction plan announced last November. The property tax assessment date is next month on the 1st. The tax rate for houses priced between 600 million and 900 million KRW will be lowered from 0.4% to 0.35%.

The special committee explained, "Due to a significant rise in publicly announced prices, it has become necessary to expand the scope of property tax rate reductions for single-homeowners," adding, "Many houses priced below 600 million KRW, which were eligible for special tax rates last year, have been excluded due to price increases."

Comprehensive Real Estate Tax and Capital Gains Tax Not Finalized but Focus on 'Easing'

Unlike the property tax, which was confirmed as party policy, the comprehensive real estate tax and capital gains tax, which faced sharp internal disagreements, were not finalized in this real estate improvement plan. The plan is to revisit these issues after public hearings and consultations next month.

On that day, the special committee proposed imposing the comprehensive real estate tax only on the top 2% of publicly announced land prices. The committee noted that the current comprehensive real estate tax threshold (900 million KRW) was introduced in 2009, and since then, inflation and housing prices have risen significantly, resulting in the number of apartments exceeding 900 million KRW in publicly announced prices increasing more than sixfold compared to 2009. They added that while the target was 0.6% in 2009, it has reached 3.7% this year. According to estimates by the Budget Policy Office, if the current standard is maintained, the comprehensive real estate tax on housing will increase by 206-234% year-on-year (from 1.8 trillion KRW in 2020 to 5.6-6.1 trillion KRW in 2021), and the number of taxpayers is expected to increase by 17-28%, from 670,000 last year to 780,000-860,000 this year.

The special committee proposed taxing only those in the top 2% of publicly announced land prices to enhance tax fairness for high-value real estate owners, in line with the original intent of the comprehensive real estate tax as a wealth tax. They explained that using a ratio rather than raising the price threshold avoids debates over the appropriateness of deduction criteria amid future housing price fluctuations and limits taxation to a small number of excessive real estate holders, thereby increasing public acceptance.

However, the government proposed maintaining the current deduction amount standard but introducing supplementary measures to partially ease the tax burden, and no agreement was reached. The government’s proposal includes △introducing a payment deferral system △freezing the fair market value ratio at 90% △introducing a long-term residence deduction for those residing over 10 years.

The same applies to capital gains tax. The special committee proposed raising the non-taxable capital gains threshold for single-homeowners from 900 million KRW to 1.2 billion KRW. The committee emphasized the need to raise the current non-taxable threshold of 900 million KRW, set in 2008, as capital gains tax is levied based on actual transaction prices.

However, opinions were evenly split during the party meeting, and no conclusion was reached. The plan is to hold public hearings in June and engage in discussions with the government and experts to either maintain the current system or prepare alternatives centered on the special committee’s proposal.

The Democratic Party stated, "The special committee’s proposal involves a complete overhaul of the current tax system, and coordination with the government is necessary. Therefore, after public hearings and consultations with the government and experts, a final plan will be prepared."

Loan Regulation Easing... LTV Preferential Rate for Homeless and Actual Demanders Increased from 10% to 20%P

The Democratic Party also decided to expand the preferential loan-to-value (LTV) ratio for mortgage loans to help low-income and actual demanders purchase homes, increasing the current 10 percentage points to a maximum of 20 percentage points. The core is to relax and improve the LTV preferential conditions for the homeless and actual demanders. The combined income criteria for couples receiving LTV benefits were raised (from 80 million KRW to 90 million KRW, and from 90 million KRW to 100 million KRW for newlyweds), and the housing price criteria were increased (speculative areas from 600 million KRW to 900 million KRW, adjusted areas from 500 million KRW to 800 million KRW), with the preferential level expanded from 10 percentage points to a maximum of 20 percentage points.

The maximum loan limit is within 400 million KRW. However, when calculating the debt service ratio (DSR), young people with currently low income but high future income potential will have their future income reflected.

Additional support measures for vulnerable groups such as youth and newlyweds were also prepared. Support for youth monthly rent loans through the Korea Housing Finance Corporation’s special guarantee was increased from a limit of 70 million KRW per person to 100 million KRW, and the public jeonse loan deposit limit was raised from 500 million KRW to 700 million KRW. The loan limit for the Bogeumjari loan was also increased from 300 million KRW to 360 million KRW.

Abolition of Benefits for Rental Business Operators, 10,000 Houses for Youth and Newlyweds, and Pilot 'Anyone Can Have a Home' Project

Benefits for rental business operators, which were criticized for causing a shortage of listings contrary to legislative intent, will ultimately be abolished. Regarding the rental business operator system, the Democratic Party decided to encourage early listings from purchase rental business operators by exempting them from the current capital gains tax surcharge only for six months after deregistration, after which normal taxation will apply. However, the current system will be maintained for construction rental business operators.

As a supply measure, 10,000 houses for youth and newlyweds will be supplied on sites proposed by local governments, and as part of the 'Anyone Can Have a Home' project proposed by Representative Song Young-gil, the project will be piloted using local government sites. Additionally, remodeling projects will be revitalized in first-generation new towns such as Bundang and Ilsan. Plans were also finalized to discover mid- to long-term supply sites such as military airports, reservoirs, and correctional facilities for use as supply land.

The Democratic Party plans to hold a high-level party-government meeting on the 30th and officially announce the final plan next week.

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