Cap on new apartments scrapped

Korea’s cabinet approved a revised bill yesterday to remove a cap in prices on newly built apartments and to repeal restrictions on their transactions as part of efforts to revive the anemic housing market.

The country’s property market has been in a long slump with a sharp drop in home purchases.

Under the bill approved by the cabinet yesterday, the government will repeal its policy of a universal application of the cap system to all newly built public housing and apply it “in a flexible manner in line with market conditions.”

The government introduced the system in 2007 in an aim to rein in skyrocketing housing prices, but it has been blamed for discouraging private home builders.

The cap in prices will be applied only to apartments the government builds and offers to the public at lower prices, and those located in regions where prices show signs of soaring, according to the bill.

The revision also abolishes a rule that banned owners of new homes from selling their property for a certain period of time to control speculative investment.

The bill follows the government’s comprehensive measures announced in May to ease administrative restrictions and lower taxes on property sales to help reinvigorate the local housing market.

The revision will be presented to the National Assembly within the month for approval, according to the land ministry.

“As circumstances have changed significantly, there is a need to restore normalcy to the market, and make it easier for people to build, sell, and buy homes,” a land ministry official said.

On Monday, the government decided to exempt capital gains taxes for five years for newly built homes purchased this year.

Acquisition tax rates will also be halved for home purchases taking place during the rest of this year.

The rate on a housing unit valued at 900 million won ($798,000) or more currently stands at 4 percent.

Yonhap