Lee Hyungil: "Sell Regulated-Area Rental Apartments to LH for Capital Gains Tax Relief"... 'Dakkong' Drive Speeds Up for Up to 63,000 Homes

Capital Gains Tax Benefits Slated for a "Phased Repeal" to Be Maintained Conditionally

Public-Sector Purchases, Including by LH, Aim to Deliver "Immediate Supply" in Urban Areas

The government is considering offering capital gains tax relief to multi-homeowners who sell apartments they own in regulated areas under the purchased rental housing program to public entities such as Korea Land and Housing Corporation (LH). The move is seen as part of its so-called “supply-first” approach: providing an exit route to avoid a “tax bomb” while converting as many as 63,000 apartments into public housing to boost housing supply in the Seoul metropolitan area, including Seoul.

Lee Hyungil, Deputy Prime Minister and Minister of Finance and Economy, who is visiting Bangkok, Thailand, to attend the annual meetings of the International Monetary Fund (IMF) and World Bank (WB), the G20 Finance Ministers and Central Bank Governors Meeting, and the G7 Finance Ministers and Central Bank Governors Meeting, speaks with members of the press on Oct. 16 (local time). Ministry of Finance and Economy.

Lee Hyungil, Deputy Prime Minister and Minister of Finance and Economy, who was visiting Bangkok, Thailand, to attend meetings including the G20 Finance Ministers’ Meeting, told a press briefing at the Queen Sirikit National Convention Center (QSNCC) on Oct. 16 that “we have heard that it is difficult to find buyers even when owners try to sell purchased rental apartments, and that tenants are concerned about instability in monthly rent and jeonse.” He added, “We are considering offering capital gains tax relief if the apartments are sold to the public sector and used for public purposes.” He said, “We need to consider further which entities would qualify as part of the public sector, but LH would certainly be included,” adding that “maintaining the tax benefits could also help stimulate transactions.”

The plan is to maintain existing tax benefits on the condition that the apartments are sold to public entities. Under the tax reform plan announced by the government in August, the exemption from the higher capital gains tax rate for purchased rental apartments in regulated areas will be reduced by half in 2028 and abolished entirely in 2029. This means tax benefits that had effectively been maintained for the duration of the owners’ lives after the mandatory rental period ended would disappear. Regulated areas currently include all 25 districts of Seoul and 15 locations in Gyeonggi Province. 

According to the Ministry of Finance and Economy, the apartments eligible for the tax benefits are purchased rental apartments in regulated areas whose mandatory rental periods have ended or whose registrations have been canceled. From 2021, when the registered apartment rental business system was abolished, through this year, the number of apartments meeting these criteria is estimated at approximately 63,000. However, some of the apartments whose registrations were canceled have already been sold, while others have yet to reach the end of their mandatory rental periods or have their registrations canceled, so the number ultimately covered is expected to differ somewhat. 

Ham Young-jin, head of Woori Bank’s Real Estate Research Lab, said, “This measure would help deliver an immediate boost to housing supply in the Seoul metropolitan area without the new construction process, which takes years from securing a site to completion.” He added, “A decisive factor in landlords’ decisions will be whether public entities such as LH are willing to pay market prices, or instead require prices below a certain level, such as the appraised value.”

This content was produced with the assistance of AI translation services.