Tax breaks perk up property sales

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Tax breaks perk up property sales

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Korea’s long-depressed housing market picked up in October compared to the previous months thanks to the government’s efforts to boost the market by providing tax breaks.

And the posh Gangnam area, once the center of the nation’s supercharged real estate market, has shown the most signs of revived interest.

But there are still doubts over whether the moribund market is coming back to life as transactions remained dull compared to a year ago, and the tax break that injected some life only lasts until the end of this year.

According to the Ministry of Land, Transport and Maritime Affairs yesterday, housing transactions jumped to 66,411 nationwide last month, up 67 percent from the month before.

The Seoul metropolitan areas saw a 75 percent hike in transactions from the month before to 25,851.

Market analysts said transactions started picking up after Sept. 24, when the government’s tax breaks for home buyers took effect.

On Sept. 10, the government announced a stimulus package that was its strongest action so far to revive the moribund sector. Earlier in the year, the government announced property revitalization measures that didn’t budge the market.

“After the Sept. 10 package passed the National Assembly on the 24th, home transactions suddenly spiked,” said Kim Heung-jin, a housing policy?managing director?at the Land Ministry.

One of the key measures of the Sept. 10 package was a full exemption on capital gains tax on real estate purchases this year. The capital gains tax is not being imposed on anyone who sells an apartment from then until the end of the year.

The government also cut 50 percent of the acquisition tax for properties purchased.

The new acquisition tax on buying an apartment is 1 percent for apartments under 900 million won ($828,000), while the rate is 2 percent for those worth over 900 million won. It goes back to the previous rate in 2013.

The Gangnam area of Seoul, which refers to three prosperous districts south of the Han River, saw transactions double from the previous month. The number stood at 1,175 in October, up from 571 in September.

“The market looks like it’s picking up now,” said Choi Ki-hoon, a realtor in Banpo-dong, Seocho District, one of three districts known as Greater Gangnam. “Compared to September, the number of contracts signed at my agency has more than doubled.”

However, realtors say the market isn’t in full recovery since transactions remain about 15 percent lower than a year earlier.

They also point out that the tax breaks end at the end of the year.

“The growth may be temporary, since the tax breaks will expire this year,” Choi said. “Many realtors want them extended.”

By Song Su-hyun [ssh@joongang.co.kr]

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