|An elderly woman passes by a local real estate agent‘s office in Songpa-gu, Seoul, in this Aug. 4 file photo. (Yonhap News)|
Political parties are locked in fierce debate to reach an agreement on an additional set of measures to boost housing transactions but also cool apartment deposit prices, or “jeonse,” following the government’s housing stimulus policy announced in April.
While the ruling Saenuri Party argues for the abolishment of heavy capital gains tax for multiple home owners, the main opposition Democratic Party favors a housing bill that includes regulatory caps on jeonse and monthly rent prices.
As the two parties sought to iron out their differences by reaching a “big deal” even as they engaged in a war of words, the Ministry of Strategy and Finance seemed to be caught in the crossfire as its economic chief voiced concerns over two parties’ key housing proposals.
Deputy Prime Minister and Finance Minister Hyun Oh-seok cautioned in a televised debate that controlling jeonse and monthly rent prices would lead to further tightening of the supply side of the market, and this could eventually hurt the tenants.
A tighter supply would lead to fewer choices on the market for apartment seekers, while further encouraging owners to change their billing to monthly rent from jeonse, as the latter is no longer attractive due to low market interest, analysts said.
Also, the proposal for price control should not be examined together with the tax issue such as capital gains tax and property acquisition tax, the finance minister said.
Although the government cited the need to cut taxes on real estate transactions as a means to revive the stagnant market, tax decreases would undermine financial resources of local governments.
The ruling party’s argument for the elimination of the heavy taxation on capital gains is that it would lessen the burden for owners to either sell or offer jeonse in the market.
The ministry had said that this should to be coordinated with regional administrations, which face mounting pressure under rising public welfare costs.
Civic groups, however, called for regulatory caps on apartment price growth as increasing prices of jeonse apartments are further dampening the livelihoods of the middle and low class.
Also, the deputy prime minister’s proposal of boosting loan extensions for jeonse seekers over regulatory price caps would only further increase the debt burden, civic groups said.
The main root of Korea’s housing problem the government should evaluate and tackle before introducing another set of measures is that there is a “price bubble” in the apartment market, industry sources said.
Speculative purchases had caused the market value to grow abnormally, making apartment seekers, especially the young, uncomfortable and reluctant to purchase homes, they noted.
Some experts also pointed out that “socioeconomic factors” such as the rapidly ageing society, high household debt and slow wage growth have contributed to the weakening housing purchase transactions.
Political parties in coordination with the government are expected to introduce a bill that contains another set of measures for housing revitalization following the April stimulus package by next week.
By Park Hyong-ki (email@example.com)