Taxing house problems

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Taxing house problems

The goal of the housing policy under the Roh Moo-hyun administration is to control house prices in affluent southern Seoul. However, after the administration entered office, from January 2003 to late October this year, housing prices across the country went up by 22.9 percent on average, and the prices of apartments in Seoul surged by 54.2 percent.
The incumbent administration set up many regulations and taxes, such as the composite real estate tax. But these have frozen the housing market, instead of bringing it under control. The goal of the housing policy under the next president must be to improve housing for the entire people.
In Korea, housing space for one person is only 67 percent of Japan’s, 52 percent of England’s and 35 percent of that in the United States. The government must resolve housing problems by providing welfare support to people with low incomes, and it must enable middle-class people to move to better housing.
The most urgent task is to normalize the housing market. For that, the roles for the state and the private sector must be clearly separated. Regulations that distort the marketplace, such as limits on prices for initial sales of apartments and publicizing building costs for apartments, must be eased.
The next president must correct real estate taxes that the Roh administration has distorted. A composite real estate tax must be incorporated into a property tax. But a composite real estate tax must be eased step by step, at first. For instance, the price of a house subject to a composite real estate tax must be increased, and those who have owned one house for a long period must be exempted from the tax. This year, as many as 500,000 families are subject to a composite real estate tax. The property tax has increased a great deal so the people have to bear a heavy burden. The government must realize that people do not need to pay too much tax relative to their incomes.
A tax imposed on profits made from house sales must be eased, as well. The transaction tax must be eased for households that have owned one home for a long period and that houses elderly people so as to increase supply in the market.
Regulations on the reconstruction of apartments must be re-examined. This kind of reconstruction is an important way to supply housing. First, all types of regulations that hinder reconstruction must be lifted, for instance, the obligation to build a certain ratio of new small apartments to rentals for low-income families. When apartments are being reconstructed, it is best that a public company decide what types and what sizes of apartments to build in accordance with consumer demand.
We hope that the next president will improve housing conditions for the entire people as a goal of a housing policy and normalize the housing market to achieve the goal.
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