April 20, 2024

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Apartment complexes in Jamsil-dong, Seoul (Yonhap)

SEJONG -- Homeowners will enjoy an increased capital gains exemption when they sell their homes when a revised law comes into effect, but doubts over whether that is enough to ease the housing supply problems still linger.

The National Assembly has passed the bill on raising the upper level for the tax exemption from the current 900 million won ($760,000) to 1.2 billion won. The revised law -- which is not applicable to multiple-home owners but to those owning only one home -- will take effect in the coming weeks.

Under the current 900 million-won standard, a homeowner who purchased a property at 700 million won and sold it at 1.2 billion won had to pay more than 13 million won in capital gains tax. But the revised law enables the sort of traders who pay nothing as the sale price did not exceed the 1.2 billion-won mark.

The legislation has come amid a recent slump in real estate transactions. But market insiders and online commenters are more skeptical about the possibility that the market could be revitalized.

Kim Hyo-sun, a real estate researcher at NH Bank, was quoted by a news outlet as saying that many people are anticipating a complete overhaul of “the taxation system involving the comprehensive real estate tax (as early as next year). The current easing of capital gains taxes would not be beneficial to stabilizing housing prices.”

His remarks indicate that a large portion of homeowners are pinning hopes on an overall cut in real estate-related tax rates after May 10, when the new administration is set to take office via the March 9 presidential election.

Online commenters say that the exemption from capital gains taxes -- up to 1.2 billion won in home prices -- should include multiple-home owners for the revised law to be effective.

“There is no doubt that more supply in the market could be attained through easing tax burden on those owning two homes or more,” a commenter said.

Though the National Assembly has pushed to ease tax burdens for multiple-home owners, as well as owners of one home, the Ministry of Economy and Finance has reportedly opposed the move.

Cheong Wa Dae has also reportedly been less sanguine over the move, while the ruling Democratic Party of Korea is in close talks with opposition parties on vitalizing the scheme for multiple-home owners.

By Kim Yon-se (kys@heraldcorp.com)