Acquisition Tax Reduction Card Played by Lee... Evidence of Increased Housing Burden Under Current Government

Benefits Limited to First-Time Buyers and Single-Homeowners
Analysis Shows Limited Tax Reduction Effects and Market Impact

The ruling Democratic Party's presidential candidate Lee Jae-myung's move on the 29th to introduce an acquisition tax reduction card, following capital gains tax and comprehensive real estate tax, is interpreted as evidence that the burden on actual homebuyers has increased due to the skyrocketing housing prices under the current government. During the four and a half years of the Moon Jae-in administration, apartment prices in Seoul nearly doubled, and various real estate-related taxes such as comprehensive real estate tax, capital gains tax, and acquisition tax surged, leading to a concentrated backlash from the angry 'real estate public sentiment.' However, the prevailing analysis is that the impact on the overall market will be limited since the reductions and benefits are restricted to first-time buyers and single-homeowners.

According to an acquisition tax simulation requested by Asia Economy on the 29th from Woo Byung-tak, head of the Real Estate Investment Advisory Center at Shinhan Bank, if an apartment of 84㎡ (exclusive area), which is the size of a national housing unit, is purchased for 1.1 billion KRW, the acquisition tax under the current tax rate is 36.3 million KRW. Even with the same acquisition price, if the apartment area exceeds 85㎡, the acquisition tax rises to 38.5 million KRW.

However, if the highest acquisition tax rate of 3% is applied by raising the current threshold from 900 million KRW to 1.2 billion KRW as proposed by candidate Lee, the acquisition tax for an 1.1 billion KRW property would decrease to 31.57 million KRW, a reduction of about 4.73 million KRW. For apartments exceeding 85㎡ with the same price, it would drop to 33.77 million KRW.

In this case, it is estimated that about 420,000 households nationwide would be eligible for the acquisition tax reduction. According to the '2021 Nationwide and Seoul Apartment Price Distribution' data from the National Assembly's Planning and Finance Committee's expert office last month, the number of houses nationwide priced between 900 million KRW and 1.2 billion KRW is estimated at 424,381 units this year. This accounts for 3% of the total 14,204,683 households nationwide. This estimate was derived by reverse-calculating this year's official apartment prices. In particular, a significant number of those owning homes in Seoul are expected to benefit. The number of homes in Seoul priced between 900 million KRW and 1.2 billion KRW this year was 247,475 units, accounting for 9.6% of the total 2,583,508 households in Seoul.

Also, if the acquisition tax 50% reduction benefit for first-time homebuyers is raised (acquisition price from 300 million KRW (400 million KRW in the metropolitan area) to 500 million KRW (600 million KRW in the metropolitan area)), a first-time purchase of an 84㎡ apartment in the metropolitan area for 600 million KRW would see the acquisition tax drop from the current 6.6 million KRW to 3.3 million KRW. This amount includes the local education tax of 0.1%.

However, experts view the raising of the acquisition tax threshold as positive for easing the burden on actual buyers and providing an exit strategy, but they believe the effect on the market will not be significant. Yeon Kyung-hee, senior researcher at Real Estate R114, said, "It is meaningful that they provided an exit for homebuyers who were stuck due to tax burdens, in line with rising market prices, and adjusted the previously inconsistent upper limit for high-priced homes." She added, "However, since the current market is influenced by loan regulations and interest rate hikes, easing acquisition tax burdens is unlikely to cause a surge in transactions."

There are also concerns about whether the policy will actually be implemented, as it differs from the current government's policy direction. Shim Kyo-eon, professor of real estate at Konkuk University, said, "The content itself is reasonable, but since it differs from the current government's stance, there remain issues of credibility and actual implementation." He predicted, "The market is more sensitive to capital gains tax and comprehensive real estate tax, so this will likely only help reduce the burden on actual buyers and make transactions more efficient."

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