[Editorial] Got'v must not waver on real estate policy

Tis the season for an all out debate about the "comprehensive real estate tax," now that the December 1 due date for reporting and payment is upon us once again. Residents of the so-called "bubble seven" areas, particularly neighborhoods like Seoul's Gangnam and the suburban area of Bundang, are getting ready to take collective action with a petition to the court. They want to switch the amount that qualifies a home for "comprehensive" taxation back to 900 million won (US$920,000) from the current 600 million won and have it calculated per family instead of by individual. You can see how this reaction might be the case, since prices have gone up so much, most people facing comprehensive tax might have to pay five to ten times what they did last year.

There is a lot of opposition to this tax, with people asking why they have to pay so much when they have lived in the same house for ten years, and when people living on pensions with no new income might be in a bind. On the surface, this makes sense. However, anyone who bases his opposition on that kind of argument is forgetting that the price of his home has shot up hundreds of thousands of dollars in a matter of a few years. Compared to prices in 2001, most places in Seoul are two to three times what they used to be. Maybe some will say that prices rose because there aren't any homes left, but only people who have their own homes can say something like that. They need to know that to those for whom prohibitive prices mean they are unable to have homes of their own, it looks like selfishness on the part of the homeowners that are protesting.

One of the reasons "real estate frenzies" turn the country upside down every few years is the inordinately low property tax rate. Just a few years ago, it was even lower than the automobile tax. It's one of the reasons that real estate stays legendarily invincible as a way to make money. Speculative real estate investment is like a virus gnawing away at the country. It must be combated, no matter the cost. The comprehensive real estate tax does not automatically guarantee stability in the real estate market. However, it is also a fact that there will never be market stability without proper taxation of highly priced homes. Most of the country knows this. According to a recent poll by Research & Research, 78.2 percent of the country agrees with the overall structure of the comprehensive real estate tax, and 66.5 percent say they want it to have more teeth.

This is a tax that was introduced at a low rate, just for starters, to avoid giving taxpayers a sudden shock. Starting this year, people will have to pay in the thousands of dollars for the tax. The displeasure is natural, but the government has to stick to its principles. If it vacillates now, all the effort put into stabilizing prices over the last couple of years will disappear in an instant, and it will be hard to implement effective policy in the future.

The government should, however, consider reducing the taxes involved in housing transactions so as to reduce the burden for people who need to move because they fear a high comprehensive real estate tax.

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