"Difficult, Difficult"... Democratic Party's Inconsistent Real Estate Policy

Supply Speed Maintained... Market Stabilization in Question
130,000 New Housing Sites to Be Announced This Month
Gimpo, Goyang, Anyang Under Strong Consideration

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] Following the abrupt abolition of the Democratic Party of Korea's proposed 'comprehensive real estate tax imposed on the top 2%,' the backlash is intensifying as the housing supply plan is also becoming difficult to proceed as planned. With policy reversals such as the mandatory two-year residency for reconstruction and the abolition of capital gains tax reductions for rental business operators, some critics argue that the constantly changing real estate policies are rather exacerbating market confusion.

On the 21st, a Democratic Party official said, "I don't understand why the Special Committee on Real Estate was even created," adding, "The proposal made after months of discussion was discarded in an instant." He also noted, "There are opinions within the party that reversing the stance could worsen public opinion."

On the 19th, the subcommittee of the National Assembly's Planning and Finance Committee abruptly scrapped the amendment to impose the comprehensive real estate tax on the top 2%, which had been announced through party-government consultations. The amendment, led by Democratic Party lawmaker Yoo Dong-su, had faced continuous concerns and criticisms regarding tax equality, the principle of ability to pay, consistency with the individual taxation system of the comprehensive real estate tax, and taxpayers' predictability. Consequently, the Democratic Party compromised by adjusting the tax threshold from the current 900 million KRW to 1.1 billion KRW.

As the Democratic Party reversed its position within a day, trust in future real estate policies is expected to decline further. The next target for the ruling party's delayed real estate policies is the Income Tax Act, which includes the long-term holding special deduction. According to the National Assembly, the Income Tax Act proposed by lawmaker Yoo Dong-su is expected to be discussed at the regular session next month. A Democratic Party official stated, "After discussions, it is expected to be processed in November."

However, the opposition party, the People Power Party, opposes this. They believe that inducing housing transactions through tax increases has limitations, such as accelerating the phenomenon of housing supply withdrawal. A People Power Party official said, "There is a progressive opinion that the long-term holding special deduction rate should be raised to 100% for one-household-one-home owners," adding, "At the very least, the current maximum deduction rate of 80% should be maintained."

As the presidential election approaches, the opposition's level of opposition is expected to rise further. Having already enforced three withdrawals by the ruling party, it is effective to intensify the offensive ahead of next year's presidential election. Ryu Seong-gil, the opposition party's floor leader in the National Assembly's Planning and Finance Committee, said at the party's floor meeting that day, "The Democratic Party tried to pass the comprehensive real estate tax law as a party stance but scrapped it and enforced the People Power Party's position," adding, "It is meaningful that the burden on the people has been significantly reduced."

This month, announcement of 130,000 new housing sites... Gimpo, Goyang, Anyang under strong consideration

The government's large-scale supply policy is also sluggish. The government plans to announce the remaining nationwide housing sites 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. However, it has been confirmed that the plan to announce the remaining 130,000 housing sites nationwide at the end of this month does not include the Seoul area. Instead, supply plans will focus on Gyeonggi-do areas close to Seoul, such as Gimpo, Goyang, and Anyang.

The Taereung Golf Course has not even been designated as a district yet. District designation and redevelopment/reconstruction promotion are impossible without the cooperation of the Seoul Metropolitan Government. The government also intends to finalize the designation of districts for 240,000 units by the end of the year and proceed with pre-subscription supply of 62,000 units by 2022.

Regarding this, Professor Shim Gyo-eon of Konkuk University's Department of Real Estate said, "The current government's real estate policy is like speaking and then retracting based on public opinion," pointing out, "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."

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