The government has proposed a support plan to temporarily restore the long-term general private rental system for apartments in declining population areas for one year. The construction industry has positively evaluated this, stating that partially easing regulations on multiple homeowners could help stimulate housing demand in local areas. However, there are limitations to resolving the long-term slump in the real estate market with a one-year exception, and some have expressed disappointment that support for exclusion for comprehensive real estate tax is missing.
On the 14th, the government held a meeting of economic ministers and announced the 'local-centered construction investment reinforcement plan' containing these details.
Specifically, the plan is to temporarily restore the 10-year private rental system for purchase-type apartments in declining population areas for one year, and the rental housing in question will be excluded from the heavy taxation on transfer tax.
The 10-year private rental system previously provided tax benefits for all dwellings, but it was abolished for purchase-type apartments after regulations were strengthened due to the overheating of house prices in the metropolitan area in 2020. This measure restores the 10-year private rental system for purchase-type apartments exclusively in declining population areas for one year.
The government plans to apply this to the apartments registered by December next year after completing related legal amendments.
For private rental dwellings (6 and 10 years) in declining population areas, there are plans to temporarily exclude heavy acquisition tax (for purchase-type) and exclude the dwellings from acquisition tax (for construction and purchase-type) for one year.
Experts in the construction industry believe that this measure will lead to positive effects, expanding the registration of private rental providers in declining population areas. Lee Eun-hyung, a research fellow at the Korea Construction Policy Research Institute, noted, 'The government is making various attempts to revive the construction economy' and explained that 'it will have positive effects to expand the registration of private rental providers limited to declining population areas while partially easing the existing regulations on multiple homeowners.' The research fellow added, 'However, since private rental dwellings are aimed at rental income and capital gains, the effects may vary or be limited even within the target areas.'
On the other hand, there are evaluations from the construction industry that a one-year exception will be insufficient to resolve the long-term slump. This is due to the structural issues accumulated over 10 to 20 years, such as population outflow and the weakening of the industrial base.
A representative from the construction industry analyzed, 'In regions like some cities in Hokkaido, Japan, where population decline and an increase in vacancies are intertwined, the supply of long-term rentals has exacerbated the vacant house problem' and added, 'It is difficult to induce investment decisions with a one-year exception, and it is even hard to secure the preparation period for the business.'
Critics have also pointed out that expanding supply without residential infrastructure only produces vacancies. They worry that supplying dwellings in areas lacking basic infrastructure such as jobs, education, and transportation may lead to 'the reproduction of vacant houses' in regions like Goheung in Jeollanam-do and Uiseong in Gyeongsangbuk-do, where the public rental rate is already high.
The omission of support for exclusion from the comprehensive real estate tax is also a disappointment. A representative from the construction industry commented, 'For dwellings registered next year, it helps to maintain rental registration, but without the exclusion from comprehensive real estate tax, no one will register rental housing while paying comprehensive real estate tax' and assessed, 'Those who pay the comprehensive real estate tax through acquiring rental dwellings are unlikely to engage in rental business.'