August 07, 2020 12:43
Angry homeowners on Thursday rallied in front of the government complex in Seoul accusing the government of reverse discrimination in curbs on real-estate speculation.
Some 20 protesters charged the government with going too easy on foreigners in restricting housing loans and hiking real-estate taxes.
They claimed that the government "is forcing people to throw away their dream of owning their own home by enforcing explosive regulations while being infinitely tolerant of foreigners."
According to the National Tax Service, foreigners bought 23,167 apartments in Korea from 2017 to May this year worth a total of W7.67 trillion (US$1=W1,186). They are concentrated in the capital region with Seoul accounting for 4,473 or W3.27 trillion worth, Gyeonggi Province for 10,093 or W2.74 trillion and Incheon for 2,674 or W625.4 billion. Chinese nationals snapped up the lion's share with 13,573 or 58.6 percent worth W3.17 trillion.
The protesters argue that it is easier for foreigners to get their hands on loans than Koreans. Regardless of nationality, everyone here is subject to a loan-to-value ratio of 20 to 40 percent on loans to buy apartments in designated speculation zones, which now cover almost the entire Seoul metropolitan area. But of course those regulations do not apply when foreigners borrow money in their own country.
One Chinese person who is here on an exchange student visa and recently became the target of a tax probe by the NTS was found to have bought eight apartments in Seoul and other parts of the country and earn rent on them. Where the money came from is unclear. And while Koreans who own multiple homes now have to pay much higher taxes when buying or transferring them -- if for example four members of the same household each own one property -- the government cannot make an accurate assessment of foreigners' households.
Thus if a Chinese couple own one home each under their respective names, each is only a single-home owners unless tax officials can prove they married and cohabiting, so the taxes are lower. One banker said, "Not all real estate taxes are beneficial for foreigners, but they could be at an advantage when you look at multiple home owners."
Critics of the loophole are calling on the government to follow the example of Singapore, which charges foreigners an extra 20 percent acquisition tax on real estate. Hong Kong also charges foreigners a stamp tax of 15 percent on real estate purchases, and another special tax equivalent to 20 percent of the value of the property if they sell it in less than three years.
When property values surged more than 11 percent in 2016, the government of New Zealand passed a law allowing foreigners to buy only newly-built homes. Some countries do not allow foreigners to buy land at all.
So far the effect on the Korean market is probably minimal since a complex combination of factors are driving prices up. But Prof. Kwon Dae-jung at Myongji University said, "If we turn a blind eye to real estate speculation by foreigners, the market could overheat."
After mounting calls for change, the ruling Minjoo Party tabled a bill to tackle the problem last month that would levy an additional 20 percent-tax on foreigners who buy a home here but do not live in it within six months, but that may not be enough.
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