Government: Tax Audit Will Continue Until Housing Prices Settle Down

Along with intensive tax audits in four areas, including the Gangnam area, Seoul, Bundang New Town in Seongnam, Yong-in, and Gwacheon, Gyeonggi Province, an investigation into the source of funds regarding 457 suspected people on charges of speculation will be undertaken.

The loan-to-value ratio (LTV) in speculation areas will be revised downwards as well.

After holding a real estate measures meeting presided over by Prime Minister Lee Hae-chan on June 13, the government announced the above as a short-term measure.

After the meeting, the National Tax Service (NTS) stated that it would carry out tax audits on areas such as Gangnam, Seoul, Bundang, Yong-in, and Gwacheon, Gyeonggi Province where housing prices have been skyrocketing, starting June 14 until the hike in housing prices settles down.

In particular, the NTS is planning to launch an in-depth investigation into the source of funds subject to a total of 457 suspected people on charges of speculation, including 181 people who sold real estates, and 276 people who acquired real estates in those areas.

If the fact that mortgage loans have been utilized as expedients for real estate speculation is disclosed through the investigation over the source of funds, the NTS plans to take measures, including the withdrawal of the loan money, against the cases in cooperation with financial supervisory authorities. In addition, the NTS decided to increase the current government-announced prices in those areas to one close to the level of the actual transaction prices.

Meanwhile, Yun Jeung-hyeon, president of the Financial Supervisory Commission, said on June 13, “Since the real estate LTV is variable, it can be changed anytime,” adding, “If the Ministry of Finance and Economy (MOFE) asks for a consultation, we will consult with the MOFE.”

The LTV is a standard that shows the credit limit-to-housing price and is restricted to 60 percent (based on banks) of an appraised value. Also, as for mortgage loans whose expiration dates are in less than 10 years in speculation areas, the rate is fixed at 40 percent.

Eun-Woo Lee Ki-Jeong Ko libra@donga.com koh@donga.com