MEASURES TO CURB REAL ESTATE SPECULATIONS

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In order to eradicate real estate speculation, the government recently decided to raise land-related transfer tax by up to 70%, nearly halting all land transactions for now. But experts point out that this is only a temporary solution and it may not be very effective in preventing land speculations in the long run.

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This village in Gimpo, Gyeonggi-do Province is being seen as a potential new residential area. Real estate transactions soared at the end of 2020 when rumors of housing site designation began to circulate. But recently purchase inquiries have stopped coming in.

The government’s announcement of a maximum 70% increase in land-related transfer tax has discouraged landowners from selling. Concerns are growing over the possibility of the latest tax hike discouraging even normal land transactions. Experts point out that it could make it more difficult for land transactions to occur in small cities or rural communities with serious decline in population rather than in the capital region.

[Soundbite] Kwon Dae-jung(Prof., Dept. of Real Estate, Myongji Univ.) : "People who want to live or farm in rural communities may be affected as well. They may be mistaken for speculators if they leave the rural areas after living there for six or twelve months."

Some experts argue that the tax increase may be able to stop land deals looking for short-term gains, but may not be effective in discouraging speculators in the long run. If an individual sells land within two years of purchase, the person will be imposed with a 20 percentage-point rise in transfer tax. But this measure will be useless if landowners sit on their real estate for an undetermined period of time.

[Soundbite] Woo Byeong-tak(Shinhan Bank Real Estate Investment Consultant) : "Lower tax rates may be applied if an individual sells land after owning it for even just one day more than two years. It is not a fundamentally effective way to curb speculation."

Also, the government must be aware that the speculative capital that have targeted land deals could be redirected to the housing market.