Prime Minister Han Seong-sook (third from left) speaks at the second National Public Forum on Real Estate Policy, held Monday at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul. [Yonhap]
Prime Minister Han Seong-sook (third from left) speaks at the second National Public Forum on Real Estate Policy, held Monday at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul. [Yonhap]

The government is moving toward restructuring the real estate tax system around the principle of owner-occupancy. The tax reform package set for release next month is widely expected to raise holding taxes on ultra-high-priced and non-owner-occupied homes while temporarily reviving a suspension of the capital gains tax surcharge on multi-home owners — giving them a window to sell.

According to the government Tuesday, the Ministry of Economy and Finance and related ministries plan to incorporate feedback gathered at the second National Public Forum on Real Estate Policy, held Monday in Seoul at the Korea Chamber of Commerce and Industry, into the tax reform package due for release in early August.

The core of the reform is expected to be a shift away from across-the-board tax increases or cuts toward a tiered system that applies different rates based on home price and whether the property is owner-occupied.

Chief among the measures under serious consideration is a temporary reinstatement — through June 1 of next year, the base date for the comprehensive real estate tax — of the capital gains tax surcharge suspension for multi-home owners, which expired May 9.

Kim Yong-beom, the Cheong Wa Dae policy chief, said in a radio interview Monday that the government is weighing how best to incorporate constructive proposals that have emerged from the real estate forums. "Ideas have come up around capping the long-term holding deduction, creating an exit route for multi-home owners facing higher holding taxes so they can put properties on the market, and easing the tax burden on those who retire and relocate to other regions," he said. "We are thinking about how to reflect these appropriately in policy."

Differentiated increases in holding taxes on ultra-high-priced homes and non-owner-occupied properties are also under review.

Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol said at the forum that "some argue the tax burden on ultra-high-priced homes is too low, and there are public concerns about multi-home ownership," signaling that the government would review ways to normalize the tax system. The remark indicated an intent to apply differentiated rates based on home price and ownership purpose rather than raising taxes uniformly.

On the financial side, the government is expected to pursue targeted support for genuine end-users and the supply side rather than a blanket easing of lending rules. Prime Minister Han instructed officials at the forum to actively review financial support eligibility criteria to ensure that middle-aged and older people without homes, as well as young adults still living with their parents, are not excluded from first-time homebuyer assistance programs. "There are many people in their 40s and 50s who do not own homes, not just young people and newlyweds, so we need to put together support measures for anyone buying a home for the first time," Han said.

Experts proposed maintaining the current comprehensive real estate tax and capital gains tax burden on owner-occupied single homes while setting deduction caps only for ultra-high-priced primary residences.

Kang Seong-hun, a professor in the department of public policy at Hanyang University, said the comprehensive real estate tax burden on owner-occupied single homes below a certain value could be kept at current levels or eased, while a deduction cap could be applied to ultra-high-priced primary residences.

Kim Yeong-do, a senior research fellow at the Korea Institute of Finance, said that while a plan for gradually reducing the misuse of jeonse loans for unintended purposes needs to be developed, "the policy effect will differ depending on which approach is used — whether it is reducing guarantees, setting annual reduction targets, or some other method."

Meanwhile, a series of real estate policy forums held over the past two weeks drew a total of 7,153 public submissions covering housing supply, finance and taxation. The government plans to reflect the feedback in a real estate tax reform package to be announced in early August.


oskymoon@heraldcorp.com