Jugeonhyeop Urges Ministry of Land to Designate Contraction Areas and Provide Additional Incentives

The Korea Housing Builders Association recently announced on the 14th that it has proposed to the Ministry of Land, Infrastructure and Transport the "prompt designation of contraction areas when the criteria for designation as adjusted areas (contraction areas) are met." The association argues for designating regions where a housing market downturn is feared as contraction areas and providing incentives such as tax exemptions.

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The association believes that although housing market regulations have been eased to prevent a hard landing in the real estate market, the policy effects have been concentrated in the metropolitan area and are insufficient to resolve the crisis in the local housing markets where unsold homes are concentrated.

According to the Housing Act, contraction areas are targeted at regions where the average housing price growth rate over the past six months, counted retroactively from the previous month, is below -1%. Among these areas, designation can be made if any one of the following conditions is met: ▲a 20% or more decrease in housing sales transactions for three consecutive months compared to the same period last year ▲an average number of unsold homes over three months that is more than double compared to the same period last year ▲regions where the housing supply rate or owner-occupied housing rate by city/province exceeds the national average. Only one of the three criteria needs to be met for designation.

Once designated as a contraction area, incentives such as exemption from residency priority requirements during subscription and acquisition of first-priority subscription qualification after one month of housing subscription savings are provided. However, the association stated that the existing incentives are not very effective and proposed additional incentive measures.

The association proposed ▲non-application of DSR or uniform 50% application regardless of bank or non-bank sectors ▲100% acquisition tax reduction for non-homeowners and 50% reduction for multiple homeowners, with exclusion from multiple homeowner surcharges ▲exemption from capital gains tax for five years when purchasing unsold homes, exemption from capital gains tax regardless of holding period when reselling pre-sale rights ▲exclusion of no-rank subscription procedures (first-come, first-served sales immediately after the standby rank), exemption from re-winning restrictions, and relaxation of tenant qualifications for public-supported private rental housing to include single-homeowners.

A representative from the Korea Housing Builders Association stated, “It is necessary to promptly designate regions where a housing market downturn is feared as contraction areas and provide incentives equivalent to those in regulated areas, thereby preparing customized response measures to prevent the risks caused by the housing market downturn from spreading to the regional economy.”

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