Hopes pinned on taxation, supply of additional units
The South Korean government said Wednesday that it aims to lower housing prices in the Seoul metropolitan districts of Gangnam and Bundang by 30 percent over the next three years, in a bid to stem the seemingly constant rise of property prices in the nation. "On the assumption that the housing market stabilizes by the end of this year, we hope to cut property prices by an annual average of 10 percent over the next three years," said an official at the Ministry of Construction and Transportation. The remark comes as property prices are showing signs of stabilization, with the prices of redeveloped apartments dropping by 20-30 million won (20,000-30,000 USD) per unit and the demand for new houses getting sluggish.According to market data, the number of houses which changed hands in the Gangnam and Seocho districts, two Seoul areas deemed to be centers of property speculation, stood at 450 and 470, respectively, in April, down from 818 and 709 a month earlier, just before the government unveiled its latest set of anti-speculation measures. As part of its drive to stabilize prices, the government’s tax hike on owners of multiple properties will take effect starting next year. "From next year, those who have more than two houses will have to pay 50 percent of transfer taxes, a great degree higher than the current tax rate of 9-36 percent," a government offical said. "I believe this will force many people to put their property on the selling block by the end of this year." Under the government's anti-speculation measures, first unveiled in August last year, the comprehensive property tax rates will also be raised for multiple home owners by 10 percent every year, to reach 100 percent in 2009. About 16 percent of households will be subject to the toughened taxation, experts say. Along with new tax policies, the government plans to provide an additional 970,000 units of houses in and around the Gangnam district. If the housing supply and multi-property taxation measures prove ineffective, the government said that it is considering raising the declared prices of housing to match their market price. Currently, declared property prices, the number used for tax scale purposes, are only 70-80 percent of the going sale rate. If the market does indeed slow, to quell the effects of a hard landing in the property market the Financial Supervisory Service said it will keep a tab on major local banks to make sure they do not provide mortgage loans recklessly. The government also launched an investigation into price-fixing allegations in several speculation-prone areas. "We are sure to tame the property market, as we have already toughened the requirement for mortgage loans," a Finance Ministry official said. "However, we are keeping a close eye on the movement of prices."
