Gov’t offers 1st housing measures aimed at stabilizing market

Jun 22, 2022, 07:32 am

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Finance Minister Choo Kyung-ho speaks at a ministers’ meeting on real estate affairs held at the Government Complex in Seoul on June 21, 2022./ Photographed by Song Eui-joo (songuijoo@)

AsiaToday reporter Lee Chul-hyun

The Yoon Suk-yeol administration on Tuesday unveiled the first batch of its real estate measures to stabilize the housing market. The real estate measures focus on easing the presale price cap regulations to expand the housing supply and providing tax support for those purchasing their own homes. The plan is to promote housing supply by improving the presale price cap scheme and the high presale price review system of the Housing & Urban Guarantee Corporation (HUG), while stabilizing the housing market by increasing the maximum home rental loan amount and expanding tax deductions for tenants.

The real estate measures came after the Ministry of Economy and Finance and the Ministry of Land, Infrastructure and Transport held a ministerial meeting on real estate affairs.

On reforming the presale price cap scheme, the government decided to recognize the tenant’s housing relocation cost, operating loss compensation cost, name litigation cost, and finance cost for moving as essential expenses and reflect them in the presale price, when calculating the price.

The expenses needed for carrying out maintenance projects such as reconstruction and redevelopment will be recognized as necessary expenses and reflected in the presale price. “In the case of financial interest related to relocation expenses, only interest for 5 years will be included in consideration of the time it takes from the time of moving to housing completion, and only 0.3 percent of the total project will be reflected in the general meeting operating cost as a flat rate,” an official from the transport ministry said.

It these costs are taken into account, the presale price would rise by 1.5 to 4 percent, according to the transport ministry.

The basic construction cost calculation and notification system will be operated flexibly. The price of basic construction cost will be adjusted flexibly if the price of a single item or the sum of the rate of increase in the price of two items of the highest prices - ready-mixed concrete and rebar - increase by more than 15 percent, or the sum of the rate of increase in the price of three items of the lowest prices - glass, flooring, and mold - increase by more than 30 percent. When calculating the cost of housing site, a verification committee will be set up where appraisers and private experts take part to share opinions in what the Korea Real Estate Agency was in charge only to review.

The HUG’s high presale price review system will be partially improved. When determining the nearby market price, the selection criteria for comparative housing will be changed from within 20 years of construction to within 10 years of construction, and detailed evaluation criteria and points will be made public when examining the high presale price. The measures will be reviewed and applied to those apartment complexes that announce the recruitment of occupants starting next month.

Experts say that the measures will relieve the housing supply in the downtown area, but an increase in the burden on the purchases will be inevitable as the presale price is expected to rise by up to 4 percent.

The government has also introduced measures to increase the amount of rentals, aimed at preventing monthly rental wolse and jeonse price from rising due to large amount of houses whose renewal contract will be expired in August that will be on the market. The government will raise the tax deduction rate for monthly rentals to the maximum 15 percent from the current 12 percent. The limit of income tax deduction for repayment of home rental loans will be extended from 3 million won to 4 million won.

Under the new measures, those landlords who raise rental prices by less than 5 percent, will get the special tax deduction for owning a property for a long-term even if they have lived in their property for less than two years if they sell the property. Those first-time homebuyers will be exempted from the property acquisition tax up to 2 million won, regardless of their income and property price.

Single homeowners who took out mortgages at speculation-prone districts to buy a new home are allowed to continue to own their previous home for up to two years.

#housing measures #rental