Constitutional change worries property market

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Constitutional change worries property market

President Moon Jae-in’s desire to clarify the public concept of land in the Constitution is expected to stir up controversy and will be branded by some as state intervention in private ownership.

A clarification of the public concept of land is expected to be grounds for the government to impose higher taxes on land development including reconstruction projects.

The Blue House on Thursday said it wants to clarify the definition of the public concept of land in the Constitution in order to reduce the wealth gap. It added that the Constitution will make it clear that the government will be allowed to impose special limits or obligations if there’s a need to protect the public interest in the land.

The current Constitution promotes the public concept of land, a principle that the land shall be used in line with the public welfare and regulated properly by the state.

However, the Blue House considers the current wording as ambiguous and vulnerable to lawsuits that claim infringement on private ownership, which is also protected by the Constitution.

Moon’s amendment is interpreted as recognizing the ownership of land by individuals, but clarifying that the government has the right to collect profits generated from it for public use.

Since taking office last year, the Moon government has introduced a series of regulations to cool off the real estate market, which it blames on greedy land speculators. As land prices rise, hardworking middle- and lower-class Korean households struggle to afford a house.

If the constitution clarifies the public’s interest in land ownership, it could allow the government to impose higher taxes or introduce regulations that will limit ownership of property by individuals.

One such result could be more tax on profits gained in the process of redevelopment of apartment buildings and complexes. Despite the Moon administration’s efforts, reconstruction projects remain lucrative and popular, especially in the affluent Gangnam neighborhood.

Owners of apartments being redeveloped say taxes on the profits are already too much.

Additionally, if the concept is clarified in the Constitution, the government could impose taxation on real estate investment as speculative non-labor income.

Some analysts see Moon’s move as a justification of higher taxes while others see it as a socialist move to give more power over land ownership and the economy to the government.


BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]

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