South Korea To Extend Housing Tax Breaks

by Mary Swire, Tax-News.com, Hong Kong

09 September 2010

After a fall in residential property transactions this year, South Korea’s government has announced a temporary loosening of mortgage lending restrictions and a reduction in property taxation.

The increases in registration and acquisition taxes for purchases of new homes (currently temporarily lowered from 4% to 2% for commercial properties and 1% for residential properties) will be delayed for one year, while the reduction in the 60% capital gains tax (CGT) payable on sales by those owning more than one residence will be extended for two years until the end of 2012. The 6%-35% lower progressive CGT rates, which have been in operation since last year, were due to expire at the end of this year.

In addition, for all new mortgage applications until March 2011, those individuals who possess no more than one property will be exempted from the existing 50%-60% debt-to-income ratio, and mortgage lenders will be able to make their own judgment on a person’s ability to repay borrowings.

The above measure will not be applicable to properties costing more than KRW900m (USD750,000), or to those in areas classified as “speculative”.

The government has, however, stressed these incentives to encourage home sales and purchases are to be a temporary measure, and do not detract from its longer-term policy to stabilize the residential property market and make homes more affordable.

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