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Cooling off measures get flak from all sides

Sept 15,2018
이미지뷰
A real estate agent watches on as government officials, including Finance and Economy Minister Kim Dong-yeon, announces new real estate regulations on Thursday. [NEWS1]
The government didn’t win over many fans with the policies announced Thursday to cool off Korea’s real estate market. Homeowners criticize them for being too harsh on non-speculators, while analysts argued that the new measures including harsh real estate taxes will help curtail demand, but that will not lower prices in the long run. Greater supply is needed as well.

“The new policies will strongly suppress demand by fostering fearful sentiments in potential home buyers,” said Ham Young-jin, head of big data at real estate app Jikbang. “They will help to curtail purchases by speculators and multiple home owners.”

The new measures also disqualify anyone who owns more than two apartments in Seoul and Sejong - which are designated as speculative investment areas - from getting a new mortgage.

“The government is trying to rein in housing demand by controlling mortgages,” said Lee Nam-su, a senior private banker at Shinhan Bank.

“I expect prices of Seoul homes to stop rising at a fast pace as the government has introduced harsher-than-expected policies,” said Park Won-gap, a senior real estate analyst at KB Kookmin Bank. Korean owners of multiple properties or particularly expensive property are angry that the measures are aimed at them.

“I don’t understand why I have to pay such high taxes when I’m not a speculator,” said a 40-year-old man who owns just one residence in Songpa District, southern Seoul. “I bought my home on loans 10 years ago. But now, because my apartment price rose above a certain threshold, I have to pay exorbitant taxes on it.”

“I’m nearly going mad now as taxes continue to soar and my only source of income is from renting out property and interest on financial assets,” said a 71-year-old retiree who owns two properties in Gangnam District, southern Seoul.

“The government should at least make it easier for us to sell our homes, instead of treating multiple property owners like criminals,” he added.

Last August, the government dramatically raised transfer taxes for multiple homeowners, making it more expensive for them to sell property.

Some analysts predict that the new measures will do little to help housing supply increase, which is a key to stabilizing prices, since multiple homeowners will be hesitant to put property up for sale when they can face up to 62 percent in transfer tax.

“Because there are no policies that would attract multiple home owners or owners of expensive real estate to sell property, it is unlikely many homes will be put up for sale, which means that housing prices will not stabilize,” said Kim Gyu-jeong, a senior real estate researcher at NH Investment & Securities.

“People will stop buying and selling homes altogether if there are no homes for sale in the market,” said Jung Bo-kyung, a real estate agent in Daechi-dong, one of the most expensive neighborhoods in Gangnam District.

Analysts argue that the government should come up with policies to increase supply of apartments in the most popular regions like central and southern Seoul, arguing that prices will not stabilize until the supply problem has been addressed.

“There is a limit to stabilizing the real estate market through taxes,” said Kwon Dae-joong, a professor of real estate studies at Myongji University. “As long as the supply of homes doesn’t increase in the city centers, home prices will continue moving upward.”


BY HWANG EUI-YOUNG [kim.eunjin1@joongang.co.kr]