Real estate acquisition tax cut extension not likely

Land Minister Suh Seoung-hwan made clear yesterday there is no plan to extend the acquisition tax cut that will expire on June 30, saying the government has other measures strong enough to boost the real estate market.

“The acquisition tax cut is considered one of the strongest measures when implemented only temporarily,” Suh said at a lecture hosted by the Korea Chamber of Commerce and Industry in central Seoul yesterday. “So we are considering whether extension of the tax cut is appropriate or not.”

Focusing on implementation of measures in the Park Geun-hye government’s April 1 property policy would be a better idea, he said.

Instead, the Ministry of Land, Infrastructure and Transport is going to announce a policy in June to address the so-called “house-poor” issue by reducing taxes for those who own a house but spend most of their income on mortgage payments and property taxes.

In March, the National Assembly passed a bill to extend the acquisition tax cut through June.

The measure was introduced Sept. 10 to revive the stagnant real estate market and considered the strongest action to stimulate the market by the Lee Myung-bak government.

The Lee administration halved the acquisition tax from 4 percent to 2 percent for the last four months of 2012 as a last-ditch effort to boost a housing market that had remained sluggish for most of Lee’s term.

The tax cut ended Dec. 31, but was resurrected by lawmakers in March.

Under the 50 percent cut for properties purchased, the acquisition tax is 1 percent for property less than 900 million won ($828,000) and 2 percent for sales of 900 million won or more.

The market wanted the tax cut back, since it had an immediate impact on transactions. There were 66,411 sales nationwide in October, up 67 percent from a month earlier. Seoul metropolitan areas saw a 75 percent spike in transactions during the same period.

Market analysts said transactions started picking up after Sept. 24, when the government’s tax break measure for homebuyers took effect.

From January through March after the measure expired, the market situation worsened.

In February, the number of transactions stood at 47,000, the lowest February total since 2006. Prices of apartments in southern Seoul also fell in March, after picking up slightly in January in anticipation of the Park administration’s property policy.

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