Discontent Mounts over Real Estate Policies

  • By Jin Joong-eon, Ahn Joon-ho

    August 10, 2020 11:30

    The government is under growing public pressure to reverse to slew of increasingly frantic anti-speculation measures that have failed to tame real-estate prices.

    People who own their home are worried about punitive taxes, while those who do not fear that they may never be able to afford one as prices continue to soar and housing loans have been restricted.

    Only the cash-rich and the tax man seem to be laughing. Shim Kyo-eon at Konkuk University said the biggest cause of the public discontent is "uncertainty whether the government's policies are aimed at helping ordinary people or just political point-scoring."

    People protest against the government's real estate policies in Gwacheon, Gyeonggi Province on Saturday. /Yonhap

    In late July, the government capped rent increases while giving tenants the right to extend their two-year leases twice, but that failed to satisfy either tenants or landlords. Tenants fear that their landlords will hike their rents unreasonably once their contract expires, while others are being kicked out as owners claim the properties back for themselves.

    Landlords, meanwhile, accuse the government of violating their rights by making it impossible for them to raise rents by more than 15 percent for new tenants and levying exorbitant taxes on property sales.

    Multiple-home owners are in a bind because both keeping their properties and selling them means hefty taxes. A person owning an apartment in the affluent Daechi-dong neighborhood in southern Seoul plus another in Mapo in the west could see real-estate taxes surge from W8.82 million in 2018 to more than W70 million in 2021 (US$1=W1,186). But if they sell one or the other they could be taxed a whopping 58 percent of the proceeds. In July 2021, the tax rate will rise even further to 68 percent.

    Until recently, the Moon Jae-in administration urged multiple-home owners to register themselves as rental businesses to enjoy tax breaks, but last month it abruptly scrapped them, leaving many owners who did as they were told feeling betrayed.

    People rally against the government's real estate-related policies in front of a department store in Seoul on Sunday.

    Even people who own only one home are worried about rising taxes. One 71-year-old retiree recently received a tax invoice of W1.2 million. "Is it a terrible crime to have saved your money all your life to buy your own apartment?" he demanded.

    Meanwhile home prices keep soaring at record speeds with no end in sight while the government has made home-loan requirements even tougher to deter speculators.

    The median apartment price has surged a staggering 53 percent since Moon took office in 2017, from W606.4 million to W927.9 billion. With the restrictions of housing loans, only the lucky few with truckloads of cash can afford to buy.

    One 36-year-old office worker said, "I would have been able to buy a small apartment in Seoul by taking out a loan just two or three years ago, but now it's become impossible."

    The government has made it easier for newlyweds and young workers to find low-rent housing, but this has prompted allegations of reverse discrimination from people in their 40s to 50s who had been patiently saving for years to buy new apartments.

    Young Koreans, meanwhile, are grumbling that such measures always favor married couples and families with many children. Double-income couples often do not meet the requirement to apply for affordable homes due to the low wage ceiling. For instance, to qualify to buy an apartment for a small down payment and the rest in installments, a household of three people must earn no more than W8.44 million a month. Earn even W1 more than that and home ownership paradoxically becomes a pipe dream.   

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