A notice opposing the government’s stronger capital gains tax measures, announced Jan. 3 as part of its tax reform plan, is posted at a real estate brokerage in Seocho-gu, Seoul, on Jan. 6. Reporter Kim Jung-hoon
Seoul Mayor Oh Se-hoon sharply criticized the government’s push to strengthen property holding and capital gains taxes, saying, “The expression ‘state violence’ struck a chord with me.” He argued that raising the tax burden would fail to stabilize home prices while only pushing up jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent) and monthly rent prices. He also made clear his opposition to a plan reportedly under government review to supply housing at Yongsan Children’s Garden, stating, “Not even a portion should be used for housing purposes.”
Mayor Oh made the remarks on the 6th at a “Citizens’ Public Forum for Normalizing Real Estate” held at Seoul City Hall, saying, “Isn’t this raising jeonse and monthly rent without even reining in home prices?” The event was the first citizen-participation public forum arranged by the Seoul Metropolitan Government after the government announced its tax reform plan on the 3rd of this month. About 100 people attended, including Seoul citizens, licensed real estate agents, officials involved in redevelopment projects and private rental housing, and academic experts.
To the point that the real estate policies of the government and the Seoul Metropolitan Government are moving in different directions, he countered that “the discord within the government is more serious.” Mayor Oh noted, “If the government has the will to solve the jeonse and monthly rent problem, it is only natural to provide incentives to private rental housing suppliers to boost investment and induce supply.” He added, “But it is applying restrictive measures in finance and taxation, so the market cannot help but be confused about whether it is being told to supply housing or not.”
He also drew a line against the possibility of using the Yongsan Children’s Garden site for housing supply. Mayor Oh stressed, “The Ministry of Land, Infrastructure and Transport says it has never reviewed it, but related talk keeps leaking out, which makes me feel uneasy.” He added, “In a city where nearly 10 million citizens live, securing as much green space as possible and passing it on to future generations is the responsibility of the government and the Seoul Metropolitan Government.” His explanation is that since the Yongsan International Business District development is underway, the Yongsan Park site should be preserved as green space.
He continued his criticism of the government’s view of redevelopment projects. Referring to a luncheon he had the previous day with Kim Yong-beom, head of the Presidential Office’s Policy Office, Mayor Oh said, “I conveyed the concern that if the government sends the market a wrong signal that it is hostile to redevelopment projects, home prices will continue to rise.”
To the government’s perception that relocation demand arising during redevelopment projects could stoke home price instability, he countered, “This is a matter that can be managed at the working level by appropriately adjusting the timing of relocation so as not to stimulate the housing market.”
Among forum participants, too, there was a series of points that strengthening taxes could lead to a jeonse and monthly rent shortage and a contraction in housing supply. Yoon Ji-hae, head of the research lab at Real Estate R114, said, “If holding taxes are raised while transaction taxes are partially eased, a conflict of interest will arise in which demand concentrates on a ‘less prime single home.'” She added, “Supply mobilizing all available resources is the only answer.”
Lee Chang-moo, a professor of urban engineering at Hanyang University, worried that the government’s policy “could drive jeonse and monthly rent households and the elderly out of city centers and let only the asset class move in.” Kim Je-kyung, head of Tumi Real Estate Consulting, said, “It amounts to telling people who retire and have no income to move to the provinces, and there is even talk of a ’21st-century goryeojang’ (an ancient practice of abandoning the elderly).”
Non-apartment and private rental suppliers pleaded that financial regulations and the tax burden at the acquisition and transfer stages are blocking new projects. Cho Kang-tae, CEO of Mangrove, proposed, “The predictability of the legal, tax, and financial systems must be increased so that corporate-style and long-term private rentals can serve as one axis of supply.”
There were also voices from the field that jeonse and monthly rent listings are rapidly declining. Park Jun, who has run a brokerage in Jamsil for 21 years, said, “Jeonse and monthly rent listings that used to come out at 50 to 80 per complex in the past have recently fallen to fewer than 10.”
After the forum ended, Mayor Oh said via Facebook, “In the government’s policy, there is no visible substantive measure for the jeonse and monthly rent market, which is directly tied to the lives of ordinary people without homes.” He added, “The purpose of real estate policy should not be to beat the market but to protect the lives of the people.”
The Seoul Metropolitan Government plans to organize the opinions presented at the forum by area—taxation, jeonse and monthly rent, and housing supply—and deliver them to the government. It also plans to jointly propose measures such as easing the tax burden on long-term holders, improving conditions for private rental and non-apartment supply, and relaxing regulations on redevelopment projects.
Seoul Mayor Oh Se-hoon delivers closing remarks after listening to residents’ views at a public forum on normalizing the real estate market, held at Seoul City Hall on Jan. 6. Reporter Cho Tae-hyung