Democratic Party Launches a Special Real Estate Committee and Reviews Easing Property Taxes for People with Single Homes

[경향신문]

When Will the Real Estate Market Be Stable? The view of apartment complexes in Yeouido, subject to government restrictions on land transactions, seen from the 63 Sky Art Observatory in Seoul on April 25. Yonhap News

On April 27, the Democratic Party of Korea officially launched a special committee on real estate and began discussing changes in the direction of the party’s real estate policies. Reducing the scope of homes subject to property taxes, increasing tax exemptions, and reducing tax benefits for people with multiple homes engaging in the leasing business are some of the ideas being mentioned. A key Democratic Party official told the reporter over the phone on April 25, “From inside the party, people have suggested revising the real estate tax system, such as raising the maximum limit for property tax cuts on the property owned by a household with only one home from property assessed at a value of 600 million won to 900 million won,” and added, “When the special real estate committee is launched, they will discuss the details.”

In the past, the Democratic Party had hinted at a change in their policies after they concluded that they were defeated in the April 7 by-elections due to the government’s failed real estate policies. Since the assessed value of real estate is the standard for imposing the comprehensive real estate tax on single-home owners, the ruling party discussed raising the standard for the comprehensive real estate tax from property valued at 900 million won to 1.2 billion won, and expanding the scope of single-home owners eligible for a 0.05% discount in property taxes by raising the standard from property valued at 600 million won to 900 million won.

When the idea of easing the comprehensive real estate tax triggered opposition within the party as tax cuts for the rich, the Democratic Party shifted its attention more on property tax cuts for households with single homes instead of easing the comprehensive real estate tax. Since the property tax of some homes cannot be raised beyond a certain level restricted by the government, the ruling party is also considering raising the assessed value of homes to allow more homeowners to enjoy the effects of a tax cut. At present, property taxes for homes with an assessed value of over 600 million won cannot be raised by more than 30% from the previous year when that is the only home owned by a household, but the ruling party is suggesting raising that standard. Since the government is scheduled to release this year’s assessed value of real estate, which will be the standard for the property tax and the comprehensive real estate tax, on June 1, the ruling party is likely to discuss adjusting the tax rate and the scope of taxation rather than the assessed value itself.

Based on the argument that the tax benefits for multiple homeowners engaging in the leasing business led to rising real estate prices, the ruling party is planning to discuss reducing tax benefits. This is also considered as a way to escape the controversy of tax cuts for the rich.

However, there are also strong concerns that a sudden shift in the party’s policy direction could push housing prices up and increase the burden on tenants. Lim Jae-man, a professor at Sejong University said, “They say it’s a policy for households with a single home, but even for single-home owners, an apartment is an investment in nature, so I can’t understand why they are trying to distinguish between the real demand and speculative demand.” A member of the Democratic Party also said, “If we reduce the tax benefits for leasing businesses, they can raise their rent and jeonse prices according to the increased taxes,” and added, “The real estate policy failed because of a lack of attention to detail, so they need to carefully consider the details.”