The government and the ruling Uri Party have backtracked on their plan to cool rising property prices. They have said they will limit the property ownership tax rate to less than 5 percent for houses worth less than 300 million won (310,000 USD) and less than 10 percent for houses worth less than 600 million won. When looked at in tandem with the administration’s current 50-percent increase cap in housing prices, the move to make the property tax caps so low was particularly reactionary. With the tax caps in place, the government’s real-estate policy stands to be undermined.
What is worse, the move may prompt some to think the government will further retreat on its policy to crack down on property speculation, which will serve to further destabilize housing prices. While the government has said it would not further deregulate property ownership taxes, such a statement is hard to believe.
Under the government’s reactionary tax caps, a gap in property ownership taxes among all homeowners will be widened, regardless of the price of their home. Harsh protest is naturally expected from people who own houses worth just slightly more than 600 million won. Under the current circumstances, it is difficult to trust the ruling party, as well as the government.
Placing a cap of 5 percent and 10 percent on housing price increase is a stereotypical product of political logic. Property ownership taxes should be increased in line with the rise in housing prices. If property ownership taxes become heavier, it serves as a natural deterrent to ballooning housing prices. If the government tries to lower property ownership taxes without taking measures to bring down house prices, it can be seen as a policy of populism.
South Korean housewives primarily handle family financial matters. So, resistance to raising such taxes is harsher than that seen with other taxes. But if the government retains its former tough policy over the next several years, an advanced real-estate taxation system involving the strengthening of ownership taxes and the easing of transaction taxes will be set. The government must not water down its real-estate policy. According to recent surveys, the majority of people still prefer that the government either retain its current real-estate policy or toughen it further. If the government continues to backtrack, the government and the ruling party will face mounts of criticism.
[Editorial] No further drop in property ownership taxes |
