Heavy taxes for multi-home owners expected to be obsolete

Following the lessening of comprehensive real estate holding tax and transfer income tax levied on multi-house owners, South Korean President Yoon Suk Yeol also decided to cut down on their tax burden of acquisition tax. The administration also plans to lift the ban on loan programs for those who have multiple houses in regulated areas. As of next year, all three heavy taxes introduced by the prior administration to rein in multi-house owners are expected to become obsolete.

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho released an economic policy direction for the year 2023 on Wednesday, announcing that the government will make a complete shift in the regulative paradigm to prevent a hard landing in the housing market amid the weakening consumer sentiment and interest rate spikes. As part of its first steps, the government will reduce the heavy acquisition tax rate for multi-house owners. The current tax rate of eight percent applied to double-home owners in regulated areas will be decreased to one to three percent, to which single-home owners are subject. Four percent, instead of the current tax rate of eight percent, is to be applied to those who own three homes. Six percent, not the current level of 12 percent, is levied on those with three houses or more in regulated areas and those who have four houses or more.

The measure of excluding multi-homeowners from the heavy acquisition tax rates, scheduled to end next May, will be extended by one year until May 9, 2024. The government also plans to cut down on the current fair market value ratio of 45 percent which is applied to property tax on single-house owners next year. This ratio is multiplied with tax bases when comprehensive real estate holding tax and property tax are calculated. The lower it is, the less tax burden becomes.

Added to this, the administration intends to revive the private rental business operator system, in effect abolished back in 2020, to resume the registration of small- and mid-sized apartment units (net leasable area of less than 85m² as long-term (of 10 years) rental houses. With loan regulation to be lessened on multi-home owners, the loan-to-value ratio (LTV) of up to 30 percent will be available in regulated areas. However, most parts of the revamps to real estate policies such as the lessening of acquisition tax require the National Assembly to pass relevant bills based on cooperation and support from the opposition party, which is adamantly opposed to reducing acquisition tax for multi-house owners.


Hye-Ryung Choi herstory@donga.com