Measures to Cool Overheating Housing Markets

 

Government to Tighten Borrowing and Raise Property Taxes

to Cool Overheating Housing Market

 

 

Deputy Prime Minister Kim Dong Yeon announced on September 13 government measures to cool overheating housing markets, which cover a wide range from borrowing regulations to taxes and supply plans. 

 

Background

 

Housing prices in the Seoul metropolitan area have skyrocketed recently despite the measures announced on August 2, 2017 to stabilize housing markets.  The government reached a conclusion that some of the reasons behind this unreasonable hike are speculative investment, and decided to tighten borrowing, as well as raise sales and property taxes.  The government has also planned to supply more houses in the Seoul metropolitan area.

 

Measures

 

1) Tighten borrowing

 

- Not allow homeowners with more than two houses to take out mortgages for additional housing purchases, if the new one is in the real estate speculation areas designated by the government, mostly in the Seoul metropolitan area

 

- Allow homeowners with one house to take out mortgages for a new house, if the purchase is proved not on speculative purposes, such as to be moved in by the buyers themselves, or their families

 

- Tighten mortgages for houses valued over 900 million won[1], making them available to only those buying the house to move in

 

- Apply lower loan-to-value (LTV) ratios of 40-60 percent and debt-to-income (DTI) ratios of 40-50 percent, if the buyers already own more than one house

 

2) Raise sales taxes and property taxes

 

- Raise property taxes by 0.1 - 1.2 percentage points, which will be applied to those owning more than three homes, or more than two homes in the real estate speculation areas designated by the government

 

- Raise property taxes by 0.2 - 0.7 percentage points, which will be applied to houses valued between 300 million won and 600 million won according to the government property value calculation

 

- Raise the ceiling of annual property ownership tax increase from 150 percent to 300 percent, which will be applied to those owning more than three houses, or more than two houses in the real estate speculation areas

 

The revision will take effect from January 1, 2019, and the extra tax revenues from the revision will be used to support working class housing.

 

3) Increase the supply of affordable housing in the Seoul metropolitan area

 

- Develop as many as 30 housing complexes in downtown areas and suburban areas with good public transportation to provide 300,000 new homes:  Use idle urban land and some of the green belts considered less important, and strictly regulate the sales of those houses to stave off speculation

 

- Work to ease urban construction rules to promote the supply of various types of housing

 

- Work on the redevelopment of old urban areas to increase housing supply in downtown Seoul