Ruling bloc working to win back trust lost from real estate fiasco

Ruling party lawmakers are gearing up to adjust details of South Korea’s capital gains taxation program to match the rising price level of housing units and thereby make up for their continued losses in public support.

The National Assembly's Strategy and Finance Committee is on track to hold a sub-committee meeting Monday to discuss details of a bill aimed at revising the guidelines on imposing capital gains tax for real estate properties.

The bill was proposed by Rep. Yoo Dong-soo of the ruling Democratic Party of Korea in August, and is mainly centered on raising the lower limit of the assessed value of real estate properties subject to capital gains tax from the current 900 million won ($761,128) to 1.2 billion won.

Yoo said in proposing the bill that South Korea’s housing prices and consumer prices have risen too much to realistically maintain the taxation standards as they have been since last revised in 2008.

In the first nine months of this year alone, South Korea's housing prices spiked near 12 percent, according to KB Kookmin Bank’s real estate platform Liiv. It was the largest-ever nine-month surge in 15 years, according to the platform.

The nine-month gain surpassed the annual gains for 2001 and 2006 - the two years considered the most heated years in the local housing market – when the median housing price jumped 9.87 percent and 11.6 percent, respectively.

The bill also proposes adjusting the qualifying standards for special tax deductions for long-term holding on houses based on prices of homes when the ownerships of the homes are transferred.

The revision would differentiate tax discounts for housing units based on the amount of change in their housing prices, with the level of deduction being smaller for housing units that grew more expensive over time.

Another proposed change within the bill asks the qualification period for the special deduction to be counted once a person becomes a single home owner, as opposed to the current law where it states the period is counted once the owner obtains the unit.

The Democratic Party is looking to pass the bill within this year’s regular parliamentary session, in line with their vision to crack down on real estate speculators and bring control back to the public that supported the party due to its failure to respond to skyrocketing real estate prices.

Its members believe that the overwhelming defeat in the April mayoral by-elections is due to negative public sentiment of the Democratic Party after housing prices in major cities became unaffordable to most people, especially those in younger generations.

Yet it is believed that the ruling party may face some hurdles in pushing the bill, as public distrust of the party remains, especially in regards to real estate, its related figures are embroiled in a growing land development scandal surrounding its presidential nominee Lee Jae-myung.

The opposition bloc is known to be in agreement with their counterpart on the emphasis of the bill but has a few details to negotiate, as they fear the tax burden could overly increase for some.

By Ko Jun-tae (ko.juntae@heraldcorp.com)