[President-elect Yoon Suk-yeol] If the opposition-dominated National Assembly is not overcome, real estate pledges will be empty promises

President-elect Yoon Suk-yeol is receiving a congratulatory flower arrangement from President Moon Jae-in through Yoo Young-min, Chief Presidential Secretary, at the People Power Party headquarters in Yeouido, Seoul, on the afternoon of the 10th. Photo by National Assembly Press Photographers Group

There is much analysis that this presidential election reflects the anger of the real estate public sentiment, but there are clear limits to abolishing various regulations that President-elect Yoon Seok-yeol proposed. This is because most require the consent of the National Assembly. Representative real estate pledges of President-elect Yoon include easing tax burdens and revising the Lease 3 Acts (right to request contract renewal, rent ceiling system, and rent reporting system). All of these require legislative amendments by the National Assembly.

First, President-elect Yoon has announced a major overhaul of taxes such as comprehensive real estate tax, capital gains tax, and acquisition tax. In particular, he plans to pursue the long-term integration of the comprehensive real estate tax with property tax. In the short term, tax burdens will be eased through rate reductions and deferrals. The comprehensive real estate tax rate for single-homeowners will be lowered to the level before the Moon Jae-in administration (0.5~2.0%). For multiple homeowners, the application of the capital gains tax surcharge will be temporarily excluded for up to two years.

Regarding acquisition tax, first-time homebuyers will be exempted from tax or subject to a flat 1% rate, and progressive taxation on owning two or more homes in regulated areas will also be eased. The Lease 3 Acts will also be revised. Although introduced to protect tenants, they led to a decrease in available properties, causing a surge in rent prices as an unintended consequence.

Since these pledges require legislative amendments, the consent of the current majority party, the Democratic Party of Korea, is necessary. In particular, the ‘integration of comprehensive real estate tax and property tax’ is expected to face opposition from local governments. Local governments with poor financial conditions receive allocations of the comprehensive real estate tax under the Local Tax Allocation Act. Ham Young-jin, head of the Zigbang Big Data Lab, said, "Considering local government opposition and the National Assembly’s deliberation process, even the possibility of implementation within this year is doubtful." Revising the Lease 3 Acts is also expected to be difficult. Since the Democratic Party pushed the Lease 3 Acts through a vote, they have a strong will to defend them.

However, some regulations for housing supply and easing of loan regulations fall under the discretion of the Ministry of Land, Infrastructure and Transport and financial authorities, so outlines are expected to emerge relatively soon. President-elect Yoon pledged to relax the loan-to-value ratio (LTV) to 80% for first-time homebuyers. Although this conflicts with the debt service ratio (DSR) regulation, it is considered a matter for internal government coordination and thus has a lower hurdle compared to other pledges. The adjustment of the fair market value ratio is also expected to be implemented quickly. This ratio is applied to the publicly announced price when determining the tax base and can be set by presidential decree within the range of 60~100%. Although this ratio is scheduled to be raised to 100% this year, President-elect Yoon pledged to lower it to 95%, the level of last year.

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