Yoon promises to deliver on property campaign promises

Economy

Published: 04 Apr. 2022, 19:20

Yoon promises to deliver on property campaign promises

A real estate agency in Songpa, Seoul, on Monday. Apartment prices in the three popular districts in Gangnam, southern Seoul, have stopped falling as there have been growing expectations over Yoon Suk-yeol’s real estate policies. Especially apartments that have been built in the 1970s including Eunma in Dachi-dong and Jugong 5 Danji in Jamsil are gaining wide attraction. [YONHAP]

Apartment prices are jumping again as expectations build that the new administration will relax real estate regulations that were toughened over the last five years.

According to the Korea Real Estate Board, prices in the three Gangnam districts — Gangnam, Seocho and Songpa — have ended a 10-consecutive-week slide.

One of the apartment buildings where prices have been increasing sharply is the Eunma complex in Daechi-dong, Gangnam.

An 84-square-meter apartment which sold for 2.55 billion won in February lists at between 2.7 and 2.8 billion won.

"There have been more inquiries from people wanting to buy as there are expectations over real estate regulations," said a realtor in Daechi-dong. "Landlords are pulling apartments that they had up for sale."

The apartment complex, built in 1979, has been up for redevelopment since 1996, but work has been delayed by disagreements between owners and tougher regulations.

Prices have also gone up sharply at Jugong 5 Danji in Jamsil, right across Lotte Tower.

The asking price for a 76-square-meter apartment, which was built in 1978, is 3 billion won. In January, a similar apartment sold for 2.7 billion won.

The recent rejuvenation of the property market has been triggered particularly by President-elect Yoon Suk-yeol's promise to ease property taxes imposed on homeowners, especially those that own multiple units.

President-elect Yoon's transition team last week announced that it plans to honor its campaign promise of easing a capital gain tax levied on multiple home owners temporarily to encourage homeowners to sell their properties.

It said it has made a request to the outgoing Moon Jae-in government, which is in office for another month, to suspend the additional taxes levied on multiple homeowners when selling their properties.

As a means of controlling speculative real estate investment, the Moon government implemented a system where multiple homeowners will be hit with higher capital gains taxes when selling their properties.

A person could pay a capital gains tax as high as 75 percent.

By allowing only the base tax rates to be applied for a year, the Yoon transition team hopes that multiple homeowners will be encouraged to sell their properties, and this would translate into stabilizing the real estate market with lower prices.

The goal is to have this suspension implemented this month before taxes are calculated for homeowners this year in June.

"We are working to take necessary steps to temporarily suspend the increasing rate on capital gain taxes on multiple homeowners for a year," said Choi Sang-mok, former vice finance minister, who is on the transition team. "It was a promise to the people to ease taxes and stabilize the property market."

Even without the support of the Blue House or the Democratic Party (DP), the transition team plans to implement the suspension once in office, possibly in May. As the suspension is only temporary, it does not require the approval of the DP, which controls the National Assembly.

"This year, because the assessed value has increased sharply, the burden on multiple homeowners is expected to go up significantly," Choi of the transition team said. "That's why we're trying to take preemptive measures."

"Our goal is to have people sell the apartments before June when the tax bill comes out."

Overturning real estate policies implemented during the Moon administration has been one of the key pledges of Yoon.

Rising property prices helped Yoon and the opposition People Power Party in recent elections and is expected to play a pivotal role in the upcoming local elections in June.

BY LEE HO-JEONG, HAN EUN-HWA [lee.hojeong@joongang.co.kr]