Taxation of Actual Market Price for Speculation Area

From next year, the place where has a sudden rice in prices of houses and lands will be designated as ‘a speculation area’ and so a transfer income tax will increase by maximum 51%. For these areas, the tax standard will be changed into a real market price, not basic price and declared price. The tax burden will increase by maximum twice or three times.

‘Stocks-lined bonds’ which is a principal preservation typed-investment instrument will be launched within the year, but customers can hardly get the secured loan on house from the financial institutions.

The government decided to take the measures of △ real estate market stability △ stock market stability and △ restraint of household loan increase in Economic Coordination Meeting held in Gwacheon Government Complex under the supervision of the Deputy Premier and Minister of Finance and Economy, Jeon Yun-Cheol on October 11.

At that day, in the meeting, it took the strong real estate speculation restraint measure considering that the unrest psychology has been still existing since announcement of 9·4 real estate measure.

The government will introduce ‘speculation area’ system from next year separated from the speculation overheating zone’ and ‘land dealing allowable zone’.

When the area is designated as ‘speculation zone’, the transfer tax income standard of its houses and lands changes to the real market price from the basic market price (70~ 80% of real market price) and individual declared land price (60∼70% of real market share). Also, applying an elastic tax rate of the maximum 15% points, the transfer tax rate of 9∼36% will jump to 24∼51%.

In addition, the government will plan to classify the houses of KRW 0.6 billion with less than 45 Pyeong(about 178 sq. yds) of actual area like a luxury apartment of Gangnam, Seoul as ‘high priced house’, and amend the income tax law to put the transfer tax with the actual market price not basic market share.

The government also plans to expand the land dealing allowable zone confined in Pangyo and the development limitation zone of metropolitan area to the overheating of land price. Gimpo, Paju, Hwaseong, Yongin, Jeju and Bukjeju-gun is likely to be added.

In terms of the stock stability measure, the government will determine the draft of corporate pension law until the end of the month and submit it to the National Assembly by the end of next February.

The government will introduce the principal preservation-typed product through stock-linked bond and will allow the integrated asset management account (Wrap Account) of securities companies.

Also, it will extend 60% of house collateral approval rate of the financial instrument which is applied to only the speculation overheating zone to protect the sharp rise of household loan to the whole country, and will increase the risk weight of the house collateral loan to 60∼70% from 50% when calculating the BIS equity capital rate based on BIS of banks.

Kwang-Hyun Kim Kwang-Am Cheon kkh@donga.com iam@donga.com