Property Measures, a Step Backward?

For the decrease in sale prices of apartments, the system that links the sale price of apartments with the cost prices of construction, housing building sites, and other related sites will be applied to all apartments on public development housing land.

In addition, the apartments to which the system will be applied cannot be sold for 10 years in the metropolitan area and five years in provincial areas.

The transfer income tax imposed on households that own two houses will increase by a single tariff of 50 percent, but houses that are worth less than 100 million won in the metropolitan area are exempt from the tax increase.

The Uri Party said on August 25 that this plan was confirmed in the seventh government-ruling party consultation on property policy.

The consultation concluded that the system aforementioned, which is currently applied to apartments of 25.7 pyeong or less, will be introduced to all apartments.

Regarding the apartments under the system, the restricted period of reselling sales rights will be extended from five years to 10 in the metropolitan area, from three years to five years in provincial areas.

The transfer income tax for households owning two houses was initially planned at 60 percent of the single tax, but was finally agreed on at 50 percent.

The tax increase will be applied to houses worth more than 100 million won in standard prices in Seoul, Gyeonggi, and six major metropolitan cities and houses worth more than 300 million won in provincial areas. In all, some 200,000 houses will be subject to the increase.

With regard to the integrated property tax, houses valued at more than 600 million won or more, not 900 million or more, will be subject to the tax increase. And the tax will be imposed on the total amount of individual households. About 160,000 households are estimated to pay the integrated property tax.

The ceiling of the integrated property tax increase (50 percent) was initially planned to be abolished, but for fear of tax resistance, the ceiling was revised upwards to 200 to 300 percent.

The standard of taxation to housing price (the standard price to impose a tax), currently at 50 percent, will increase to 70 percent next year and rise every year by 10 percent to 100 percent by 2009.

The government and the ruling party agreed to increase the property tax standard starting in 2008, two years later than previously scheduled, considering the increased burden of possession taxes of end users. However, the effective tax rate of the property tax of one percent will be imposed starting 2017 as planned by the government.

Additionally, the consultation decided to decrease the acquisition and registration tax to one percent from the current four percent.

It also decided to increase the housing supply in Pangyo new town of Seongnam, by ten percent and build an additional 3,200 housing units of mid- and large-sized apartments.

Ki-Jeong Ko In-Jik Cho koh@donga.com cij1999@donga.com