The government is reviewing comprehensive real estate measures that encompass taxation and finance, with a national discussion forum led by the president scheduled for July 23. This forum is expected to be a turning point in determining future policy directions. Key issues include the transition of the comprehensive real estate tax (CRET) assessment criteria, the threshold for high-value homes, and how far to recognize actual homebuyers in housing finance.
According to industry sources on July 21, the forum is likely to address a proposal to shift the CRET assessment criteria from the current focus on the number of homes owned to the combined value of those homes. The existing system imposes a heavier tax burden on multi-homeowners with lower-priced properties compared to single-homeowners with high-value properties, leading to ongoing debates about tax equity.
At a previous public forum on real estate taxation held on July 16, participants suggested that the property tax system should be restructured based on value rather than the number of homes. However, the transition of criteria and actual adjustments to tax burdens are separate issues. The market's response will vary depending on where the threshold for high-value homes is set and how much burden is recognized for actual residents with one home.
While there are calls to make ownership burdens more realistic, concerns have been raised that a rapid increase in tax burdens could lead to rent hikes or tax resistance. Particularly, actual residents with one home may react sensitively to tax increases, as rising home prices do not immediately translate into improved cash flow. If the expectation is that strengthening property taxes will lead to more listings, there are warnings that market backlash could outweigh policy benefits.
Woo Byung-tak, a specialist at Shinhan Premier Pathfinder, stated, "While increasing property taxes on high-value homes may be justified from a tax equity perspective, the approach of pressuring multi-homeowners or high-value property owners to sell their properties could likely repeat past policy errors. The government should communicate with the public based on the justification of securing fair tax equity that aligns with price increases, rather than pursuing the unrealistic goal of inducing listings."
In the financial sector, the boundary between loan regulations and protection for actual homebuyers is a contentious issue. As of 3 p.m. on the day of the real estate forum, a total of 3,356 public policy proposals had been submitted on the forum's website. Among these, 1,449 were related to housing finance, 1,096 to housing supply, and 802 to real estate taxation.
Notably, around 400 of the housing finance proposals included keywords related to "first-time homebuyers" and "actual demand." Common suggestions include increasing the loan limits for first-time homebuyers and raising the loan-to-value (LTV) ratio, as well as increasing the loan limits for tenants needing funds to vacate for actual residence purposes. There are also questions about whether it is appropriate to group actual demand from first-time homebuyers and those looking to switch homes under the same regulatory framework.
The recent tightening of loan access by major banks has further fueled the debate over actual homebuyers. KB Kookmin Bank has reduced the maximum loan limit for home purchases in the metropolitan area and regulated regions from 600 million won to 300 million won. Complaints are growing among first-time homebuyers and those looking to switch homes, who feel that the blanket regulations are excessive, compounded by the government's household debt management policies and banks' self-regulation.
However, financial authorities maintain that they must uphold the principles of managing total household debt and preventing overheating in the real estate market. They are concerned that broadly relaxing loan regulations in the name of protecting actual homebuyers could rekindle buying momentum. Ultimately, the key issue will be how far to recognize first-time homebuyers, those needing to sell existing homes to switch, and landlords requiring funds to vacate as actual demand.
In the supply sector, calls for regulatory relief continue. The redevelopment industry argues that easing relocation loan regulations and expanding floor area incentives are necessary to promote urban supply. If financing for relocation is blocked, the timelines for relocation, demolition, and construction could be delayed, highlighting the need for exceptions or supplementary measures in financial regulations.
Conversely, there is significant caution within and outside the government regarding excessive regulatory relief, which could stimulate investment demand and exacerbate housing price instability. While there is agreement on the need to expand supply, it is essential to consider the signals that easing relocation loan regulations and floor area incentives would send to the market.
Experts emphasize that the upcoming forum should not merely serve as a platform for gathering opinions. They argue that tax policy must clarify standards between tax equity and mitigating market shocks, while finance should balance household debt management with protection for actual homebuyers, and supply should navigate between regulatory relief and public interest.
Song Seung-hyun, head of Urban and Economy, stated, "A cautious approach is needed to first secure sufficient volumes for transactions to circulate through tax relief or easing regulations on redevelopment projects, followed by loan relaxation. Additionally, the relocation loan regulations, which are slowing down the pace of redevelopment and reconstruction, should be flexibly adjusted to provide some breathing room."
* This article has been translated by AI.
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