Eight Districts in the Metropolitan and Chungcheong Regions Removed from Speculation Zones

Five districts in the metropolitan area including Gwangjin-gu in Seoul and three districts in the Chungcheong area including Dong-gu in Daejeon were removed from housing speculation zones.

Sellers in regions free of the regulation will be relieved of the tax burden since a capital gains tax will be levied based on the tax standard value, not the actual transaction price.

The government held the Real Estate Price Stabilization Council on Wednesday, chaired by Vice Minister Kim Gwang-lim of Finance and Economy, at the Banker’s Building in Seoul to lift the ban on the eight districts out of 39 speculation zones.

Gwangjin-gu in Seoul; Seo-gu in Incheon; Gwangmyeong-si in Gyeonggi; Jungwon-gu in Seongnam-si; Bucheon-si; Dong-gu and Jung-gu in Daejeon; and Cheongju-si in Chungbuk were eased of the regulation.

From January 31, sellers in these regions will pay a capital gains tax based on the tax standard value set by the National Tax Service, not the actual transaction value.

This is the third time the regulation has been eased since August and December last year, and now 31 areas are designated as speculation zones. Meanwhile, the real estate industry has a high opinion of the government’s decision, however, it estimates that this may not be enough to revive the stagnant housing market.

In fact, 18 regions where the regulation was removed last year witnessed no changes in their real estate markets, including Jungnang-gu and Seodaemun-gu in Seoul; Buk-gu and Haeundae-gu in Busan; Seo-gu, Jung-gu and Suseong-gu in Daegu; Gunpo-si, Uiwang-si and Hanam-si in Gyeonggi; and Chuncheon-si in Gangwon.

The standard of imposing a turnover tax has changed from the statutory standard price to the tax standard value starting this year, placing a heavier tax burden on house buyers. The statutory standard price is 30 to 40 percent of the market price while the tax standard value is 70 to 90 percent of the market price.

“Buyers will not enjoy benefits, and most of the regions that were removed from the regulation are outside cities, so transactions are not likely to be revitalized any time soon,” said Director Go Jong-wan of real estate consulting firm RE-Members. “But Gwangjin-gu in Seoul, Gwangmyeong-si, and Bucheon-si in Gyeonggi may see renewed investment sentiment since there is actual demand.”

Chang-Won Kim In-Jik Cho changkim@donga.com cij1999@donga.com