NAN-F-32
Investment
Seoul, Aug. 2, 2017 (Xinhua/NAN) The new South Korean Government under President Moon Jae-in on Wednesday, unveiled its second comprehensive measures to control speculative investment in the real estate, amid a rapid increase in home prices.
The Minister of Land, Infrastructure and Transport, Kim Hyun-mee, announced the measures at the government complex building, Seoul.
The minister, who took office on July 23, said in her inaugural address that recent home price hikes were attributable to speculative investors, heralding tougher action on speculative property investment.
The previous government disclosed anti-speculation measures in November last year, and the new administration took another action in mid June to control speculative investment in the real estate market.
Despite the government warnings against speculative investors, apartment prices in the capital Seoul have risen at a faster pace in the past four weeks.
In some parts of Seoul, the selling price of apartment surged over 100 million won (88,900 dollars) in a month.
According to the land ministry data, the percentage of home purchase made by those who own one house or more was in average of 43.7 per cent from 2013 to 2017.
The percentage was 31.3 per cent tallied from 2006 to 2007.
In August 2005, the government of late President Roh Moo-hyun, to who Moon served as Chief of Staff, announced the country’s toughest ever measures to regulate speculative property investment.
The measure helped to cool down the overheated real estate market.
Impeached President Park Geun-hye, Moon’s predecessor, abolished many of the 2005 regulations to prop up the lacklustre economy by bringing a boom to the real estate market.
Regulations on mortgage financing were eased and the benchmark interest rate was lowered to an all-time low of 1.25 per cent in June 2016.
This resulted in the prolonged record-breaking increase in household debts as it was aimed for people to buy new homes with borrowed money.
Most of the 2005 regulations were restored through the Wednesday measures.
They bordered on tightening of mortgage financing, designating of overheated speculation areas and the heavier transfer tax on those who own more than two homes.
All of the 25 districts in the capital, Seoul as well as the Gwacheon city in Gyeonggi province and the administrative city of Sejong in South Chungcheong province were re-designated as overheated speculation areas.
The designation regulation was restored in about six years.
The designated areas would be subject to a total of 19 regulations at a time, including the tightened standards for mortgage financing.
Both the loan-to-value (LTV) and debt-to-income (DTI) ratios would be lowered to 40 per cent in those areas from the previous 60 per cent and 50 per cent respectively.
The lower LTV and DTI ratios indicated smaller loans owed by households to banks, relative to the home value and the annual income of home purchasers.
For households which already borrowed bank loan to purchase new home, the LTV and DTI ratios would be lowered further to 30 per cent.
The first-home buyers would be subject to the ratios of 50 per cent to meet residence demand from those who have no homes.
In addition to the overheated speculation areas, 11 districts in Seoul and the Sejong city were designated as areas of speculation in which one household is actually allowed to own one home.
Higher capital gains tax from home sales would be imposed on all of the districts in Seoul, seven areas in Gyeonggi province, seven districts in the southeastern port city of Busan and the Sejong city.
Currently, those who possess more than two homes are subject to a transfer tax of 6-40 per cent.
From April 1 next year, the two-home owners would be subject to 10 percentage points, more than the existing capital gains tax.
Those who hold three homes or more would be subject to 20 percentage points, plus the existing capital gains tax rate.
Those who “own” one home, worth less than 900 million won for at least two years got exemption in the past from the capital gains tax.
However, it was changed into those who “reside” in one home for over two years as part of efforts to meet the residence demand. (Xinhua/NAN)
OYE/DUA
Edited by Celine-Damilola Oyewole/Dada Ahmed