With Public Opinion Turning Away, Ruling Party 'Freezes Official Property Prices'... One-Time Criticism Ahead of Presidential Election (Comprehensive)

Ruling Party and Government Agree on Rapid Tax Burden Relief
Next Year's Property Tax Calculated Using This Year's Official Prices
Possibility to Lower Burden by Adjusting Fair Market Value Ratio
However, Market Points to 'Temporary Measure' Before Election
Rightward Shift 3 Months Before Presidential Election... 'Turning a Blind Eye'

On the 20th, at the National Assembly Members' Office Building, Song Young-gil, the party leader, Yoon Ho-jung, the floor leader, and Noh Hyung-wook, the Minister of Land, Infrastructure and Transport, along with other key attendees, are taking a commemorative photo before the start of the meeting on the improvement of the official property price system. Photo by Yoon Dong-joo doso7@

The ruling party and the government agreed on the 20th to ease the burden of property tax and health insurance premiums for single-home households, which is interpreted as a measure to prevent damage to actual homebuyers caused by the rapid rise in housing prices. Since the Moon Jae-in administration, housing prices have risen to 'record highs' every year, leading to excessive tax burdens and strong public backlash, prompting the ruling party and government to come up with the desperate measure of 'supplementing the official property price system.'

However, the industry points out that the Democratic Party of Korea is pushing for a 'one-time' tax burden relief aimed at winning votes ahead of the presidential election. Considering that Democratic presidential candidate Lee Jae-myung has focused on tax increases in his pledges so far, and that the ruling party and government have decided not to touch the plan to realize official property prices this time as well, it is highly likely that this will be a 'turning a blind eye' type of system reform that temporarily lowers taxes before the election but raises them sharply later.

Democratic Party Changes Stance on 'Regulation Easing' as Public Discontent Grows

Song Young-gil, leader of the Democratic Party, said in his opening remarks at the ruling party-government meeting on the 2022 official property prices, "I think some adjustment is needed in the reality where the tax burden on the people is effectively increasing due to the official property price realization measures." This is interpreted as an intention to seek a full-fledged policy change as concerns within the Democratic Party grew amid worsening public discontent related to real estate.

Democratic Party lawmaker Jin Sung-jun said on KBS radio that "It is true that the government failed to prevent the surge in real estate prices," adding, "It would be good to find ways to reduce the burden on the people without undermining the major principles." Jin, who has played a hardline role supporting stronger real estate regulations such as comprehensive real estate tax and capital gains tax, is seen as having clearly changed his stance.

Park Young-sun, former Minister of SMEs and Startups and chair of the Digital Transformation Committee of the election campaign headquarters, also appeared on MBC radio and said, "The real estate policy pursued by the Moon Jae-in government was on the right track but was implemented too radically," and defended the party's policy shift by saying, "No matter how right the policy direction is, it is reasonable to approach flexibly by adjusting the speed when facing backlash."

Applying This Year's Official Property Prices Next Year, Adjustment of Fair Market Value Ratio Also Considered

The core of the ruling party-government consultation on this day was the freeze of holding tax next year. They decided to consider applying the 2021 official property prices, not the 2022 ones, which serve as the basis for calculating next year's property tax and comprehensive real estate tax. Along with this, they are also considering introducing a cap on holding tax for single-home households. This is a desperate measure taken because it is realistically difficult to recalculate next year's official property prices for detached and multi-family houses, which are already in the calculation process.

The government plans to continue raising official property prices significantly every year according to the official property price realization roadmap announced last year, and the increase rate of official property prices for multi-family houses next year is expected to exceed 20%. In this case, the tax burden on homeowners will inevitably increase. If the ruling party and government apply this year's official property prices to next year's tax calculation as announced, it will effectively freeze the holding tax at this year's level.

In particular, the ruling party and government hinted that they might adjust the fair market value ratio, a discount rate concept applied when determining the tax base. Currently, the fair market value ratio for property tax is 60%, and lowering it by just 5 percentage points could reduce the tax burden next year. For the comprehensive real estate tax, this ratio is scheduled to increase from 95% this year to 100% next year, but there is also talk of adjusting the increase speed to lower the tax burden.

Park Wan-joo, chairman of the Democratic Party's Policy Committee, said, "We also requested to review the temporary deferral of comprehensive real estate tax payment for elderly single-home owners," adding, "We requested to review the issue including the adjustment of the fair market value ratio." However, this requires a legislative amendment process. According to the Ministry of Land, Infrastructure and Transport, the position is that as long as the Local Tax Act is amended before June next year, when the tax obligation arises, it is sufficient.

Market Confusion Due to Tax Reform Becoming a Political Tool

However, the industry criticizes that the ruling party and government are only producing temporary policies to secure approval ratings ahead of the presidential election in March next year. In fact, they decided not to review the plan to raise the official property price realization rate to 90%, which is a major cause of excessive tax burden. Chairman Park said, "We will faithfully implement the real estate official property price realization plan established last year."

Lee Eun-hyung, senior researcher at the Korea Construction Policy Institute, said, "I agree on the need for immediate temporary measures, but discussions on long-term directions also seem necessary," adding, "If housing prices rise, there is room to reconsider the official property price realization roadmap."

Adjusting the fair market value ratio is merely a measure that can be changed anytime through a revision of enforcement ordinances, and the comprehensive real estate tax deferral for the elderly requested by the Democratic Party is only postponing tax imposition, not reducing the tax itself, so it is difficult to consider it a fundamental solution.

There are many criticisms that the ruling party and government, which have been pushing for stronger real estate regulations, are stirring market confusion by attempting a 'right turn' before the presidential election. Candidate Lee maintained a stance throughout this year to stabilize housing prices by recovering a large amount of unearned income, but suddenly changed his position three months before the election by first postponing the capital gains tax surcharge and then proposing a complete overhaul of official property prices.

While some in the market say it is right to partially ease regulations now to reduce tax burdens and allow properties to come onto the market, there is also considerable backlash saying, "Only those who sold their homes early according to existing government policies became fools." Kim Jae-hyun, full-time deputy spokesperson of the People Power Party, criticized in a statement, "Candidate Lee's frequently changing comprehensive real estate tax, basic income, land holding tax, and capital gains tax are 80-day pledges before the election, 'empty' pledges and time-limited pledges that the public no longer trusts."

Seo Jin-hyung, president of the Korea Real Estate Society (professor at Gyeongin Women's University), said, "The ruling party and government need to show their will by immediately starting legislative amendments rather than just presenting temporary measures in consideration of next year's presidential election," adding, "They should also adjust the realization rate and tax rates to reduce the tax burden."

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