Parties reach agreement on property bill but fail to finalize

Economy

Published: 01 Sep. 2022, 19:17

Parties reach agreement on property bill but fail to finalize

View of apartments in Seoul. [YONHAP]

Despite the two biggest rivaling parties reaching an agreement to ease housing property taxes earlier in the day, it failed to be finalized at the last minute.

The Strategy and Finance Committee at the National Assembly on Thursday passed the bill to ease the burden of the comprehensive real estate holding tax on people that temporarily own two apartment units during a transaction process for reasons such as relocating to another city.

Additionally, taxes on the elderly and those that have owned the same single apartment for an extended period of time will also be eased.

However, the bill, which was supposed to be put to a vote that day during the main session, never even made it to the chopping block.

The comprehensive real estate holding tax is imposed on those whose housing’s assessed value exceeds 1.1 billion won ($818 million) for a single unit and 600 million won for two or more.

Under the bill, those who temporarily own two apartments due to inheritance or being in the middle of a sale process, or those who own a low-valued housing unit outside of major cities including Seoul, the additional unit will not be taken into account when levying the comprehensive real estate tax.

The government estimates some 100,000 people will benefit from the bill if it passes. This includes roughly 50,000 who currently own two apartments due to relocating, 10,000 who inherited a housing unit and 40,000 who have another housing unit outside of the city with an assessed value of 300 million won or less.

Additionally, up to 80 percent of the tax will be waved for those who are either at least 60 years old or who have owned a single housing unit for a minimum of five years until they either sell or pass on the real estate.

To be eligible, a person has to have a total salary of 70 million won or less or a total income of 60 million won or less. Their taxes to be waived also have to be more than 1 million won.

Those aged 60 to 64 will get 20 percent of their taxes waved while those aged 65 to 69 will get 30 percent. Those 70 years and older get 40 percent waved.

Some 20 percent is waved for those who have owned a single apartment for less than 10 years. The amount is raised to 40 percent for those who have had the unit for less than 15 years. Half of the tax will be withheld for those who have had the unit 15 years or more.

The maximum ceiling is 80 percent, for an elderly person who has held their property for 15 years or more.

Some 84,000 people are expected to benefit if the bill is passed.

The comprehensive real estate holding tax is the first bill to pass the committee since the National Assembly’s regular season opened on Thursday.

It came a day after the current heads of the People Power Party (PPP), the party of President Yoon Suk-yeol, and the rivaling Democratic Party (DP), which holds the majority, met after former presidential contender Lee Jae-myung officially became the head of the DP party.

During the meeting on Wednesday, the PPP’s floor leader and interim chair of the party Kweon Seong-dong requested the cooperation of the DP’s new leader Lee, reminding him of his campaign promise of easing the tax burden on owners of single apartments.

“I have told the party to cooperate regarding the comprehensive real estate holding tax issue,” Lee replied. “But even so, you should not try to be greedy and hope that the issue would be solved at an appropriate level.”

People Power Party floor leader Kweon Seong-dong, left, and Democratic Party chairman Lee Jae-myung met for the first time since Lee became the head of the DP on Wednesday. [YONHAP]

Even if the current proposal on the comprehensive real estate holding tax change is passed, the biggest issue still remains unresolved.

The government has proposed raising the assessed value on the tax for single home owners from 1.1 billion won to 1.4 billion won for this year.

If applied, some 214,000 apartment owners will be exempt from the tax, including single owners and those with joint ownership with a spouse.

The window for change is limited as the comprehensive real estate holding tax payment bill is delivered in November and payment starts in December.

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