Government to Sort out Some Areas for First-of-its-Kind Real Estate Policy

The government has selected eight districts, where home buyers should report their housing transactions to authorities for the actual housing price-based taxation of acquisitions and registrations, starting on April 23 at the earliest.

On April 19, after a survey of the market prices of houses, the Ministry of Construction and Transportation selected eight areas, including Gangdong and Songpa districts of Seoul; Kimpo of Gyeonggi province, Ahsan of Chungcheong province, and Chuncheon of Gangwon province.

Construction and Transportation Minister Kang Dong-suk will hold a meeting on April 23 to finalize the list of report-obliged areas.

The new measure, first introduced as part of the October 29 real estate policy, took effect on March 30. Once selected, the areas will be affected by the measure for the first time in Korea.

The affected area are selected among the areas where real estate speculation is rampant with a 1.5 percent monthly increase rate in housing prices or more, three percent or higher quarterly rises or the yearly average price doubling the national counterpart. An affected area can be as small as a city or county district or a single housing compound.

“We will select areas where there are upward price trends or which have strong policy repercussions,” Park Sang-woo, the ministry’s housing policy director, said, “We will tilt toward selecting city or council districts and likely exclude smaller administrative units such as eup, myeon, and dong.”

Real estate industry insiders believe that the government will choose the southern regions of Seoul, Sujeong district of Bundang, and the city of Ahsan are the most likely candidates. Meanwhile, they expected that Kimpo and Chuncheon will be excluded as real estate prices in these cities have begun to stabilize.

Once legislated as an affected area, homebuyers there should report their transactions to local authorities within 15 days of their completion along with the names of the contractors and their national ID numbers, the date of the contract, the net price and the timetable of the transfer of ownership.

As registration and acquisition taxes will be levied based on the net price, the amount of the two taxes will increase three- or six-fold. For instance, the two taxes on a 33-square-meter apartment in Bundang will rise to 2.6 million won from 1.75 million won.

The measure won’t affect transactions that have completely sealed and notarized ahead of the measure.

“These candidate areas are where there have been many transactions and prices have risen,” Kim Young Jin, the president of http://osp.chol.com, said. “Once affected by the measure, housing transactions will fall and so will the prices.”

Kwang-Hyun Kim kkh@donga.com