Real Estate Holding Tax Rises 3-5 Times

Starting in 2005, the tax base, which is the standard for charging real estate holding tax such as property tax and aggregate land tax, may rise to a figure of 50 percent of the official land price at the most.

Initially, the government was planning to raise the present tax base, which was 30 percent of the official land price, to 50 percent starting in 2006. The Minister of Finance and Economy Kim Jin-pyo yesterday said at the National Assembly`s Inspection of Finance and Economy Committee, “In order to stop the soaring real estate prices, the time to readjust the tax base to a realistic level will be advanced” emphasizing the means to raise the tax base starting next year or in 2005.

If the tax base rises to the level of 50 percent of the official land price, it is estimated that the real estate holding tax will rise 3-5 times higher than the present, determined by the area or the size of the real estate.

Kim said, “The mayor of Seoul and the governor of Kyonggi Province were called today (October 9), and agreed to realizing the increased tax base at a good time” hinting that Seoul and Kyonggi Province may apply to the raised tax base starting next year.

Kim also said, “The overall measures we will take, such as enlarging the supplement to settle the imbalance of the supply-demand of housing, and showing to the public the tax system, financial regulations, and speculator list will be announced during this month,” and added, “Intense measures such as restricting the reconstruction market and enlarging the prohibited targets of resale of future ownership rights will be taken.”

Kim included that the right to assess the tax base of the real estate holding tax, which the head of the local government has presently, may be given to the central government.

The Financial Supervisory Board (FSS) announced yesterday that examination of the banks within the speculation zones will be taken during this month, determining if they are lending more than the housing mortgage loan rate as an expedient.

FSS explained that some banks are giving housing mortgage loans, even if the client’s requested amount passes the authorized rate, which doesn’t count as a credit loan requisite, and will focus on examination on those cases.

KSS Bank Inspection first director Baek Jae-hum said, “We are informed that there are places in the speculated areas which give loans with housing mortgage loan rates surpassing 50 percent of the mortgage price.”

Bank of Korea Governor Bak Seoung, yesterday after finishing a meeting with the Monetary Policy Committee, said, “If conditions get better, regarding real estate matters, raising interest rates will be considered.”

Bak stressed, “It isn’t the right time to raise interest rates right now, and if conditions show a recover, then interest matters can be considered.”

Meanwhile, Choi Jong-chan, minister of the Ministry of Construction and Transportation, yesterday said, “Housing prices in the Seoul metropolitan area have risen too high from speculative demands,” and that, “Sooner or later, housing prices will fall.”