Deputy Minister Kim Yong-beom, head of the president's policy office, said that as the end of the temporary suspension of the heavy capital gains tax on owners of multiple dwellings approaches, a pattern of positive change has been observed in the real estate market, including owners of multiple dwellings meaningfully selling dwellings. Regarding the long-term holding special deduction (Jangteuggong), which has recently been the subject of controversy, Kim said, "Of course it will be maintained," and added, "We will ensure there are no issues in protecting single-homeowners who actually live in their dwellings."
On May 4 at the Blue House, Deputy Minister Kim held a press briefing on real estate and said, "With the end of the temporary suspension of the heavy capital gains tax on owners of multiple dwellings on May 9, I came here thinking it would be good to explain how the market has moved over the past couple of months and how it might move going forward."
Deputy Minister Kim said that since Jan. 23, when President Lee mentioned the end of the temporary suspension of the heavy capital gains tax on owners of multiple dwellings, there have been positive changes such as a narrowing in the rate of price increases and a rise in listings in the three Gangnam districts and Yongsan.
Kim explained, "It is very unusual in the flow of Korea's dwellings market that the three Gangnam districts and Yongsan fell first," adding, "Usually, when the dwellings market rises, high-priced apartment areas or the Gangnam belt, which can be seen as the hot spot, rise first, and when it falls, the outer areas of the Seoul metropolitan area and the outskirts of Seoul, which can be seen as the cool spot, fall first. This time, home prices fell first in the three Gangnam districts and Yongsan." Deputy Minister Kim said, "From the perspective of easing asset inequality and real estate inequality, I judge that a positive pattern has emerged."
Deputy Minister Kim presented specific transaction statistics. According to an analysis by the Ministry of Land, Infrastructure and Transport in March of apartment transactions in Seoul, there were 2,087 sales among Seoul apartments held by owners of multiple dwellings. The average monthly number of sales last year was 1,577, an increase of about 32%. An analysis of the buyers showed that 73% had no dwellings.
Deputy Minister Kim said, "It can be seen that most of the listings released by owners of multiple dwellings were bought by those with no dwellings," adding, "Among buyers, those in their 30s or younger accounted for 45%. A positive pattern was also seen in narrowing intergenerational gaps."
He partly acknowledged concerns that a lock-up of listings could emerge after the end of the temporary suspension of the heavy capital gains tax on owners of multiple dwellings on May 9. Deputy Minister Kim said, "When the Moon Jae-in administration strengthened the heavy capital gains tax measures in June 2021 and the base date passed, listings from owners of multiple dwellings fell by about 21%," adding, "It is correct that listings will decrease to some extent."
He added, "I do not think, as some say, that after the 9th prices will rise until December because of a lock-up of listings," and "Wouldn't the three Gangnam districts and Yongsan, which have been suppressed for a couple of months, rise to the extent of returning to their own trend? I expect price increases to be moderate."
However, Deputy Minister Kim viewed that a different pattern would emerge from the past because the Lee Jae-myung administration has consistently signaled that it will rationalize the tax system for owners of multiple dwellings, non-occupants, and ultra-high-priced dwellings, and has said it will not tolerate unearned real estate income.
Deputy Minister Kim said, "We are also preparing legal measures that would allow legislation enabling sale orders for speculative elements that expect capital gains, by conducting a full survey not only of dwellings but also of farmland," adding, "For corporations' non-business-use land as well, the National Tax Service has formed a task force to look into it."
He said, "The consistent stance is that it is absolutely unacceptable for dwellings for living and land for corporate activity to be used contrary to their original purposes," adding, "Real estate has, with great difficulty, entered a path toward some normalization, and we will proceed with the view that there can be no deviation from that."
Regarding the supply of dwellings, he said the previously released groundbreaking of 60,000 units will be prepared without a hitch. He also said that measures announced in the Sept. 7 package, including public housing site projects, abolition of the sunset for public urban complex development, and the use of aging government office sites and school sites, will be accelerated. Deputy Minister Kim said, "We will ensure supply proceeds according to the announced supply schedule so that people do not engage in panic buying."
He also stated his position on the Jangteuggong, which has recently sparked controversy. Not long ago, lawmakers from the Democratic Party and The Progressive Party in the broader ruling camp introduced an amendment to the Income Tax Act to fully abolish the Jangteuggong, which centers on the holding period, and to raise the deduction rate in proportion to the actual period of residence. There was even talk that the government might abolish the Jangteuggong as Democratic Party lawmakers participated in introducing the bill.
Regarding this bill, Deputy Minister Kim said, "The government has nothing to do with this bill," adding, "The Jangteuggong will of course be maintained."
Deputy Minister Kim said, "Residence and holding are both set at 40%, and there needs to be consideration as to whether this really fits with reorganizing the dwellings market around actual occupancy," adding, "When the Jangteuggong is reorganized around actual occupancy, how to view reasons other than actual occupancy is something that requires further gathering of opinions."