On September 13th, the Korean government announced tougher measures to impose more property taxes on houses and restrict mortgage loans in order to stabilize the housing prices in the country.
Details of the New Measures
Housing prices in main regions including Seoul, Sejong, Busan, and adjacent areas have increased dramatically for about four years due to excessive real estate speculation. In order to rein in soaring housing prices and stabilize the real estate market, the Korean government has released new measures to control speculative investment. Under the new measures, tax rates for multiple homeowners will be raised. People who own more than three houses around the country and who own two houses in the capital areas will need to pay 0.1-1.2%p more taxes than before, which will be a maximum of 3.2% of the house price. Moreover, the new measures will make it difficult to buy houses because mortgage loans will be restricted. Owners of more than two houses will not be able to receive mortgages when buying a new house in metropolitan areas. The same rule will be applied to owners of one house, but there are some exceptions. They can get loans in the cases that they promise to sell the existing house afterwards and that the purpose of buying a new house is to support their parents, for their children to move out, or to transfer their workplaces. In addition to restricting loans for multiple homeowners, mortgages will not be available when buying high-priced housing worth over 900 million unless it is for the purpose of living in. Last but not least, the government planned to build 300,000 more new houses around Seoul metropolitan areas under the new measures. To sum up, the new real estate measures are expected to impose heavier taxes and restrict mortgages on owners of multiple houses and high-priced housing.
Expected Effects on Real Estate Market
New housing measures are expected to discourage people who already have their own houses to buy other houses for the purpose of investment. It will also rein in striking housing prices in main regions, especially in the Gangnam District in Seoul, where lots of high-priced housing is located. Some critics, however, expect that the impact of the new measures would not be significant because they do not seem to solve the basic problem: a lack of housing in metropolitan areas. Although the government has announced that it would build more housing in Seoul and adjacent areas, it will take some time to choose the right places and start construction.