Property capital gains tax cut for some on Yoon's first day

Economy

Published: 09 May. 2022, 17:04 Updated: 09 May. 2022, 17:46

Property capital gains tax cut for some on Yoon's first day

View of apartments in Seoul on Monday from Lotte Tower in Jamsil. [YONHAP]

The capital gains tax for sellers of some properties will be cut from Tuesday by the new administration as it works to cool the overheated housing market.

According to the Ministry of Economy and Finance on Monday, the additional tax imposed on homeowners with two or more residential housing units will be suspended for a year.

Under current regulations, 20 percentage points of tax is added to the 6-to-45 percent capital gain tax for those owning two apartments when selling a property. For those owning three or more, 30 percentage points is added to the capital gain tax rate.

With the changes, the top rate drops from 75 percent to 45 percent.

The suspension only applies to properties owned for more than two years.

Higher capital gains taxes are levied on properties in certain designated areas where prices have increased dramatically in recent years. All districts in Seoul are included and major cities in Gyeonggi.

The move came at the request of the Yoon Suk-yeol's transition team last month to encourage multiple homeowners to sell their additional properties before June, when the government imposes a property holdings tax.

During the presidential race, Yoon promised to address the out-of-control property market, where prices spiked after the Moon Jae-in government imposed heavy restrictions, including tightening loan regulations and increasing taxes, and limited the supply.

According to the Finance Ministry, in Seoul the number of housing units sold dropped from 188,000 units in 2017, the first year of the Moon administration, to 127,000 units in 2021.

As Yoon's tax measure is temporary, it does not require the approval of the National Assembly.

Housing prices have recently been stabilizing.

According to the Korea Real Estate Board on Friday, housing prices nationwide were unchanged in the week to May 2 on week.

Prices rose 0.1 percent on week in Seoul.

The Korea Real Estate Board cited higher interest rates as central banks respond to inflationary pressures.

The Korean central bank, which has been raising interest rates since August last year from a record-low of 0.5 percent to 1.5 percent, is expected to make additional increases later this month.

The U.S. Fed raised rates last week by 0.5 percentage points, the sharpest increase in 20 years.

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