By Kim Jae-kyoung
Staff Reporter


The government and the ruling Uri Party have agreed to save people with low-priced homes from heavier capital gains taxes, the Uri Party said Thursday.

The agreement, which aims to minimize damages to people residing in low-cost homes they own, came at the seventh government-ruling party real estate policy meeting attended by top-ranking government officials and Uri Party lawmakers on Wednesday.

Under the agreement, people owning homes worth less than 100 million won in Seoul, satellite cities surrounding the capital and six metropolitan cities, will not be subject to the new taxation plan to levy heavier capital gains taxes on those with two homes.

In provincial areas, those with homes worth less than 300 million won, will be excluded from the new taxation plan.

The two sides also agreed to provide some flexibility to those who bought an extra house for a residence, such as a married couple or someone who temporarily owns two homes while changing residence.

Through such flexible measures, they seek to confine the number of households subject to the envisioned heavier capital gains taxes to 200,000, and reduce the tax burden in the early stage of the new taxation policy.

The two groups decided to raise the capital gains tax on people who own two houses to 50 percent from the current nine to 36 percent. Currently, those with more than three homes have to pay 60 percent capital gains taxes.

However, they plan to implement the plan to impose heftier capital gains taxes against the owners of two homes after a one-to-two year grace period to encourage the owners to dispose of their extra homes.

As well, property holdings tax on apartments and unused land will be raised to one percent by 2019 from the current 0.15 percent.

The assessment base of the comprehensive real estate tax, a national tax designed to crack down on real estate speculation, will be raised to 100 percent of the standard price gradually by 2009 from the current 50 percent.

And those with properties worth more than 600 million won will be subject to a comprehensive real estate tax beginning next year. Currently, the tax targets people owning homes worth more than 900 million won.

To offset significant increases in property holding and capital gains taxes, the government plans to lower property transactions taxes by 0.5 of a percentage point.

On the supply side, the two sides agreed to offer new housing sites to increase the supply of homes in Seoul and satellite cities in Kyonggi Province.

The government plans to supply national and public lands of two million pyong (6.6 million square meters) in the capital area to meet the demand for medium and large apartments in the wealthy Kangnam area in southern Seoul, the epicenter of the real estate bubble.

It plans to supply 45 million pyong of housing sites for the next five years or nine million pyong per year in the capital area. One pyong is 3.3 square meters.

Under this plan, the government plans to supply a total of 1.5 million new homes by 2010, which comes to 300,000 homes per year to resolve the housing supply shortage, one of the key factors behind rampant real estate speculation.

The government and the ruling party also agreed to supply medium and large apartments in Pangyo, Kyonggi Province and develop new towns in the Kangbuk area in northern Seoul.

The government plans to announce a final version of new comprehensive real estate policy on Aug. 31 following the last government-ruling party policy meeting on that day.

kjk@koreatimes.co.kr