Seoul to amend real estate tax rates in July

Seoul real estate tax
Seoul, South Korea (Credit: evahegoh on Pixabay)

South Korea’s government will slash real estate and inheritance tax rates next month JoongAng Daily reported on Monday (June 17) citing Finance Minister Choi Sang-mok. The official said that the details of the reform will be announced sometime in July. According to the report, Sung Tae-yoon, director of national policy at the presidential office, proposed a reduction in inheritance tax rates to a maximum of 30 percent and a restriction of real estate taxes to owners of highly-priced homes or multiple homes with a very high total value.

Seoul also announced easing regulations for real estate investment trusts (REITs) as part of efforts to help normalize the real estate project financing (PF) sector. REITs, or real estate investment trusts, are companies that own or finance income-producing real estate across a range of property sectors.
The government will create “project REITs” after drastically lifting regulations so as to allow a greater number of small investors to join projects, and will expand REIT investment targets to health care, data centers and other promising fields, according to the Ministry of Economy and Finance.

“The government will help to allow more people to enjoy the benefits of real estate development,” Choi told an economy-related ministers’ meeting. “We will continue efforts to normalize the PF market.”

The measures come in the face of risks stemming from rising delinquencies in the real estate PF sector. The delinquency rate of real estate projects climbed to 2.70% by the end of last year, up from 1.19% a year before and 0.37% at end-2021, according to the country’s Financial Supervisory Service. House prices in South Korea have been falling since June, 2023, as high interest rates and concerns about an economic downturn weighed on demand.

In March, the Bank of Korea warned that a further slump in the real estate sector would undermine broader economic activity.