Ruling Party Sets House Prices Ablaze and Withdraws... Seoul Supply to Drop Again

Metropolitan Housing Supply Plan Excludes Seoul
Capital Gains Tax Reduction and Top 2% Comprehensive Real Estate Tax Abolished
Policy Trust Broken by Retracting Statements

Yoon Ho-jung, the floor leader of the Democratic Party of Korea, and Kim Jin-pyo, the chairman of the Real Estate Special Committee, are attending and conversing at the policy members' meeting on real estate held at the National Assembly on the 27th. Photo by Yoon Dong-ju doso7@

[Asia Economy Reporter Jang Sehee] It has been revealed that Seoul is not included in the metropolitan area housing supply plan to be announced at the end of this month. Concerns are rising that future housing supply will not gain momentum due to entanglements with vested interests before the presidential election, making it even harder to expect stability through supply. The Democratic Party's scrapping of the comprehensive real estate tax plan targeting the top 2% has led to criticism that trust in future real estate policies has hit rock bottom.

According to the Democratic Party and the Ministry of Land, Infrastructure and Transport on the 20th, Seoul was confirmed to be excluded from the '110,000 metropolitan area housing' supply plan to be announced at the end of this month. This is due to the lack of suitable supply sites and strong opposition from residents in the sites under review. Instead, the ruling party and government plan to propose supply measures focused on Gyeonggi-do areas near Seoul, such as Gimpo and Goyang. The government plans to announce remaining sites nationwide totaling 130,000 units (including 110,000 in the metropolitan area) by the end of August and finalize plans for a total of 240,000 units by the end of the year.

As the possibility of Seoul being excluded from the supply measures increases, real estate supply in Seoul is expected to become even more difficult following last year's August 4th supply plan. Last year, the government announced the designation of Taereung CC as a new housing site, but it has yet to be officially designated.

With setbacks inevitable not only in the comprehensive real estate tax plan targeting the top 2% but also in the supply measures, the current administration's real estate policy aimed at curbing speculative forces is being shaken at its roots.

In particular, the proposed revision of the Income Tax Act is also losing momentum. A Democratic Party official said, "Due to opposition party logic, the long-term holding special deduction for capital gains tax is more likely to stagnate." The current amendment to the Income Tax Act proposed by Representative Yudong-su includes raising the non-taxable capital gains threshold for one household one house from the current 900 million KRW to 1.2 billion KRW and reducing the benefits of the long-term holding special deduction. However, the People Power Party points out that reducing tax benefits on capital gains could accelerate the phenomenon of property hoarding.

Professor Shim Gyo-eon of Konkuk University's Department of Real Estate said, "The current government's real estate policy tends to retract statements after gauging public opinion," adding, "There is no trust in the policy itself." Regarding supply, he said, "Supply in old urban areas excluding public housing sites is very likely to be canceled due to opposition from local governments."

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