The government is expanding tax support for local real estate, leading to forecasts that housing demand in non-metropolitan areas may partially revive. It is expected that demand for purchases of 'Second Homes' near tourist destinations and industrial complexes will be stimulated by expanding the areas and dwellings eligible for the one-household, one-dwelling exemption.
This measure appears to be able to increase local housing demand in the short term. However, there are concerns that there are limits to revitalizing the housing market in non-metropolitan areas structurally. It is projected that long-term recovery of housing demand in local areas will be difficult unless essential living infrastructure and job creation are established.
On the 14th, the government held an economic ministers' meeting and announced the 'Measures to Strengthen Local-Centered Construction Investment.' The government stated, "This plan focuses on bolstering construction investment and revitalizing the stagnant local construction market."
◇Expansion of the one-household, one-dwelling exception for local apartments
This plan includes measures to strengthen tax benefits for one-homeowners purchasing dwellings in areas of population decline to supplement local real estate demand. If a one-homeowner buys an additional dwelling 'Second Home' not only in areas of population decline but also in areas of interest regarding population decline, the one-household, one-dwelling exception will apply. This exception allows a one-homeowner who additionally purchases a local dwelling to be considered as having only one dwelling instead of two, granting benefits for capital gains tax, property tax, and comprehensive real estate tax.
When purchasing an additional dwelling in areas of population decline, the housing price eligible for the one-household, one-dwelling exemption will increase from 400 million won to 900 million won based on the publicly announced price. The acquisition price for dwellings that can receive acquisition tax benefits will expand from 300 million won to 1.2 billion won.
The one-household, one-dwelling exemption, which applied when purchasing unsold dwellings in local areas, will be extended for another year until next year. In particular, the exemption for the increased acquisition tax and the 50% reduction measure will be executed temporarily for one year.
◇Expectations for increased demand for second homes centered around tourist areas
Experts evaluated that this measure could partially increase local housing demand. Seo Jin-hyung, a professor at Kwangwoon University, noted, "The measure that excludes dwellings below 900 million won from the one-household exemption will help create demand in the local real estate market," adding, "As measures to resolve unsold properties are also strengthened, there are positive aspects for revitalizing the local real estate market."
Particularly, as this policy is likely to stimulate demand for additional dwellings in the nature of second homes, there are forecasts that transactions in areas near tourist destinations or industrial complexes may increase. The areas newly applying the one-household, one-dwelling exception due to population decline are Gangneung, Donghae, Sokcho, and Inje in Gangwon Province, Iksan in North Jeolla Province, Gyeongju and Gimcheon in North Gyeongsang Province, and Sacheon and Tongyeong in South Gyeongsang Province.
Park Won-gap, the senior real estate expert at KB Kookmin Bank, stated, "This policy seems to focus on 'living population' instead of 'resident population.' There may be an increase in interest in cities where tourism and leisure are well developed. Gangwon Province seems to be in line to benefit the most," he explained. He added that "if industrial complexes are established in rural areas, the demand for nearby dwellings could also revive."
Lee Eun-hyung, a researcher at the Korea Construction Policy Research Institute, mentioned, "It is positive to expand the target areas for easing the tax burden centered around areas of population decline and relax the housing value limit," adding, "If the policy objectives are clear, it is necessary to provide substantial support for them."
At the same time, this researcher noted, "However, considering the main purpose of a one-homeowner purchasing an additional dwelling in areas of population decline, the policy effects are expected to vary or be limited by region," explaining, "If we assume demand for weekend farms, vacation homes, or physical investments, we can somewhat predict the regions suited for these purposes."
◇There are also skeptics about investing in local real estate instead of stocks
There are also skeptics who believe that the impact of this tax benefit expansion will not be significant. As 'One good dwelling' has established itself as a trend in the housing market, it is said that there is little possibility of overall demand increasing, except for specific regions in local areas with good locations. Since the government's tax exception is temporary, there are concerns that once the tax relief effects disappear, housing transactions may sharply decline.
In particular, it has been pointed out that the structural reform aimed at moving assets concentrated in real estate to the capital market is diminishing the effects of this measure.
A real estate expert who requested anonymity commented, "Even if one buys a local apartment, it means not being completely exempt from taxes but rather being given some discounts, and the demand for additional local apartments will be limited in the dark outlook for local housing market conditions" and added, "Especially since the government is creating alternative investment opportunities such as revitalizing the stock market, and the investment trend is such that those who have one dwelling increase their investments in financial assets like the stock market and cryptocurrencies, there may be limits to the rising demand for local real estate."
To structurally recover local real estate demand, it appears essential to hasten balanced regional development. Kim Hyo-sun, the senior representative at NH Nonghyup Bank, stated, "This policy is strongly aimed at recovering the local construction market," noting that "multi-faceted policy supplements such as regional economic revitalization and expansion of educational infrastructure are necessary to drive local housing demand."