SEOUL, Aug. 5 (Korea Bizwire) — South Korea’s ruling party is pushing to impose heavy taxes on “speculative” foreigner buyers of apartments here amid their rising home ownership, officials said Wednesday.
The move comes as the Democratic Party (DP) has vowed to create countermeasures if necessary amid rising concerns over foreigners’ apartment purchases for speculative purposes.
According to the officials, a DP lawmaker has recently proposed a bill aimed at helping prevent foreign investors from speculating in the domestic property market.
The bill, submitted by Rep. Ching Il-young, calls for levying acquisition taxes of 20 percent on foreigners who do not reside in their apartments for six months without due reasons after purchasing them.
The current law slaps acquisition taxes commensurate with transaction values without considering buyers’ nationality or their actual residence.
In addition, foreigner apartment buyers are exempt from various financial regulations, such as a cap on mortgages, raising worries about “reverse discrimination against South Korean purchasers.
Rep. Chung said he will also present bills for imposing capital gains and comprehensive real estate taxes on foreigners who do not live in their apartments after purchases in an effort to stem their property speculation.
“Signs of a surge in domestic apartment prices appear to have promoted foreign investors to rush to the South Korean market amid a lack of regulations on their speculation,” an official at Chung’s office said.
DP floor leader Kim Tae-nyeon recently said the party and government are keeping close tabs on foreigners’ apartment purchases and will map out countermeasures if necessary by consulting foreign examples.
He took New Zealand, Singapore and Canada as examples of restricting foreigners’ property purchases in order to prevent their speculation. New Zealand currently imposes a ban on foreigners’ housing transactions, and Singapore levies heavy acquisition taxes.
Foreigners’ property transactions in South Korea have been on a steady rise in recent years amid the hot real estate market in Asia’s fourth-largest economy.
According to the National Tax Service (NTS), 1,036 foreigners purchased more than two homes in South Korea between 2017 and May this year due to “speculative demand.”
Of the 23,167 homes purchased by foreigners during the period, 32.7 percent were not occupied by owners.
The NTS said it has kicked off a tax probe into 42 foreigners who own multiple homes in the nation.
A separate tally by the Korea Appraisal Board showed that foreign transactions of apartments and other structures came to 2,090 in June alone, the largest number since data tracking began in 2006.
Despite a series of government countermeasures, apartment prices in Seoul and other areas have continued to soar, driven by ultra-low interest rates and excess liquidity.
President Moon Jae-in has vowed to take all available measures to stamp out property speculation and tackle soaring housing prices, especially around the Seoul metropolitan area.