Korea eases regulations on multiple homeowners to stabilize property market

[Photo by Park Hyung-ki]

The South Korean government will ease loan regulations and tax burden on multiple homeowners in efforts to stabilize the property market as the economy is headed for low growth of under 2 percent next year.

Under policy briefing outlined by the Ministry of Economy and Finance to President Yoon Suk-yeol on Wednesday, the government will allow up to 30 percent in loan-to-value (LTV) ratio for multiple homeowners in speculative cities such as Seoul, Gwacheon and Seongnam in Gyeonggi Province that was completely banned in 2018 during the previous Moon Jae-in government.

The change in the ratio only requires an amendment in Financial Services Commission rule.

The up to 75 percent capital gains tax from property sales for multiple homeowners will be pushed back to May 2024 instead of the same month next year under a revised income tax law. The government plans to amend the tax law in July next year to introduce a fundamental easing in taxes.

The government will also lower the up to 12 percent acquisition taxes on multiple homeowners. Currently, 8 percent tax is levied on those with three houses, or two in speculative regions, and 12 percent on those with more than four houses, or three in speculative regions. Taxes will be lowered to 4 percent and 6 percent each.

The measure needs an amendment to the local tax law, which requires consent from the main opposition Democratic Party. The government plans to seek an amendment in local tax law in February next year and return paid taxes to homeowners as of this month.

The easing in taxes and loan regulations for multiple homeowners come as the Korean economy is projected to grow 1.6 percent next year. The government is hoping that more houses owned by multiple homeowners are sold in the market to lower living costs.

The companies will be able to receive a 10 percent tax break should they spend more money on investment. The government will also provide 50 trillion won ($39.1 billion) to support small and mid-size enterprises and startups.