Minister Kim Yun-duk of the Ministry of Land, Infrastructure and Transport said this week the government plans to announce additional real estate measures, including an expansion of regulated areas, to stabilize the dwellings market. Despite two rounds of real estate measures under the new administration, home prices have continued to rise, prompting a preview of strong measures to curb demand. Kim also said the ministry will respond strictly to illegal activities that disrupt the dwellings market, such as recent efforts to inflate home prices.
At a National Assembly audit by the Land Infrastructure and Transport Committee held in Yeouido, Seoul, on the 13th, Kim answered a question from Rep. Kim Eun-hye on whether the follow-up real estate measures would increase regulated areas by saying, "I think it is inevitable."
Regulated areas refer to speculation zones, speculation-prone districts, and areas subject to adjustment. Currently, only the three districts of Gangnam in Seoul (Gangnam, Seocho, Songpa) and Yongsan District are designated as speculation-prone districts and areas subject to adjustment. Once designated as a regulated area, the loan-to-value ratio (LTV) for dwellings mortgages is reduced from the existing 70% to 40%, and acquisition tax, capital gains tax, and the comprehensive real estate tax for multiple-home owners are tightened. Leading candidates for additional designations include Mapo, Seongdong, and Gwangjin districts in Seoul, known as the "Han River belt," as well as Gwacheon in Gyeonggi Province and Bundang in Seongnam.
On the timing of the real estate announcement, Kim said, "We are aiming to announce it this week."
Asked whether measures related to loans or taxes would be included in the additional real estate package, Kim avoided a direct answer, saying, "It is not our lead ministry."
However, the market expects the package to include measures that further reduce available borrowing, such as tightening the debt service ratio (DSR) regulation.
Tax-related measures are not expected to be included in this additional dwellings market stabilization plan. At a National Assembly audit by the Strategy and Finance Committee held the same day, Deputy Prime Minister and Minister of the Ministry of Economy and Finance Koo Yun-cheol, when asked whether measures that touch on taxes, such as adjusting the fair market value ratio (the portion of the officially assessed price actually used to calculate taxes), would be included in the real estate package, said, "For now, we will present only the direction," adding, "Taxation is the last resort."
Asked by People Power Party Rep. Kim Jong-yang to assess the June 27 lending curbs and the Sept. 7 supply measures announced to stabilize the dwellings market, Kim said, "There were partial results, but I think they are still far from sufficient."
Kim said, "The June 27 measures were demand suppression measures to block funds from flowing into real estate," and "The Sept. 7 measures aimed to increase supply somewhat, as we currently face a supply cliff, to influence the market."
Kim also answered "Trust is important" when asked, "What do you think is most important for the government's real estate policy to be persuasive to the public?"
Regarding a point by Democratic Party of Korea Rep. An Tae-jun that the public disclosure system for real estate prices does not properly reflect market prices, Kim said, "I think the gap between market prices and officially assessed prices causes various kinds of problems," adding, "Research services related to (reforming the price disclosure system) have progressed considerably. We will take steps to reduce the ills related to statistical issues." Kim also said the ministry will consider directions for improvement, including a plan to abolish the weekly apartment price trend survey that the Korea Real Estate Board (REB) publishes every week.
Kim said that he thinks purchases of domestic real estate by foreigners, including Chinese nationals, are "not fair." When People Power Party Rep. Kim Eun-hye asked, "Do you agree that the state should protect the rights of its people based on the principle of reciprocity?" Kim said, "I agree," adding, "I agree there may be some loopholes in the current process by which foreigners acquire land in Korea. We are formulating and proceeding with countermeasures."
Kim said, "If there are legal limits under which foreigners can receive preferential treatment, we will make sure to correct them," while adding, "It would be good to keep in mind that China's social system differs from that of Korea."
At the audit, when criticism arose that penalties for construction companies' serious industrial accident cases are excessive, Kim said, "There is room for adjustment." The government is currently pursuing a comprehensive labor-safety plan that would impose a penalty surcharge of 5% of operating profit and at least 3 billion won on construction companies where a serious industrial accident occurs.
Kim said, "There is a difference in stance between the Ministry of Employment and Labor and the land ministry," adding, "We are conducting inter-ministerial consultations." He continued, "Industrial accidents were an issue that needed to be addressed at least once," and said, "Given the weak construction market, I don't think punishment alone will work." Kim added, "We will work to ensure that the government's intent to prevent accidents does not lead to a contraction in the construction market."
Regarding a request by the bereaved families of the Dec. 29 airliner crash to halt the investigation by the Aviation and Railway Accident Investigation Board, Kim said, "We are conducting a legal review."
Even so, Kim said, "As a rule, the land ministry minister does not get involved in accident investigation work," adding, "We will either move up the midterm service (accident investigation) briefing scheduled for early November as much as possible or look again for ways to resolve inconveniences."