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New Apartment Resale to be Banned Starting Next Month

Posted May. 11, 2003 22:17,   


A measure to ban the resale of new apartment contracts in speculation-ridden zones until the original purchaser is fully registered as the true owner of the house will be put in place earlier than expected in mid-June.

Initially, the Ministry of Construction and Transportation planned to implement such a measure starting from mid-July considering consultations with other ministries and the period to work on an amendment of related laws. However, the Ministry said on May 11 that it will apply the measure from mid-June.

Currently, areas designated as speculation-ridden zones are: all regions of Seoul; some regions of Goyang, Namyangju, Whasung, and Yongin in Gyeonggi Province; some areas in Incheon; Seo-gu and Yousung-gu in Daejeon; and Buldang-dong, Baekseok-dong, and Ssangyoung-dong in Cheonan, Chungnam Province.

According to the Ministry of Construction and Transportation, with the Ministry of Legislation agreeing on the urgency of the measure, there was an atmosphere to amend the regulation on the supply of houses as soon as possible by quickly finishing consultations with related ministries and reducing the period of legislation pre-announcements.

The Ministry will also give harsher punishments to those illegally reselling new apartment contracts.

In accordance with the Housing Act that passed during a special session in the National Assembly last month, those found to have illegally sold new apartment contracts will have to serve prison terms fewer than three years, or pay fines of less than 30 million won, starting from the second half of this year, compared to the current two years in prison and 20 million won.

Taxes will see a sharp increase because if one sells new apartment contracts after registering him/herself as the owner of a house, the first owner will have to pay the acquisition and registration fees accounting for more than 5% of the price of the house.

Under the current scheme, the resale of new apartment contracts costs only capital gains tax according to the price base.

Those who sell new apartment contracts within one year of registration as the owner will have to pay transfer tax on the profit which is 36% of the real transaction price of the house.

“From mid-June, the period to ban the resale of new apartment contracts will increase to three years from the current one year and tax burdens will greatly rise. This will freeze the speculative real estate market,” said You Doo-seok at the Ministry.

Ki-Jeong Ko koh@donga.com