[News Today] Heavier capital gains tax reinstated

[LEAD]

The heavier capital gains tax on profits made by multi-home owners has been reinstated. With unsold listings now being pulled from the market, some analysts say apartment transactions could slow for the time being.

[REPORT]

The temporary suspension of the heavier capital gains tax on multiple home owners, which was implemented to encourage property sale, ended last Saturday.

It comes four years after the tax suspension.

From now on, capital gains tax rates for multi-home owners will go up steeply.

Owners of two homes must pay 20 percentage points more in addition to the basic tax rate.

Owners of three or more homes must pay 30 percentage points more.

With local taxes included, the effective tax rate is as high as 82.5%.

For instance, if a multiple home owner who bought an apartment in Mapo-gu District of Seoul ten years ago for KRW 850 million sold it for KRW 2.5 billion now, the tax would have been KRW 560 million before May 9.

But from now on, it can be as high as KRW 1.25 billion or nearly 850-thousand U.S. dollars.

There are concerns that the heavier tax burden could make multi-home owners withdraw their properties from the market, which may result in a shortage of apartments available for sale.

In fact, the number of apartment listings in Seoul, which recorded about 80,000 per day at the end of March, has plunged to about 60,000.

Choi Byung-hee / Real estate agent in Seongdong-gu Dist.

We told clients that if the land transaction permits aren’t applied by May 9, transactions would be difficult. I have to call them again.

However, analysts say the trend could change depending on what measures the government decides to take next, such as the revision of real estate tax policies.

Minister of Land, Infrastructure and Transport Kim Yun-duk dismissed concerns about a sharp drop in apartment listings, adding the government is considering providing exemptions to land transaction permits so that even non-resident, single home owners can sell their properties easily.