South Korea's government said Thursday it plans to ease administrative restrictions and lower taxes on property sales to help reinvigorate the local housing market.
The Ministry of Strategy and Finance, the Financial Services Commission and the construction ministry said stiff sales taxes levied on people with several homes will be discontinued, while property transaction restrictions imposed on some Seoul neighborhoods will also be lifted.
The government said the latest measures will end policies introduced when there was rampant property speculation that caused home prices to rise out of control.
Since circumstances have changed significantly, there is a need to restore normalcy to the property market and make it easier for people to sell and buy homes, it added.
South Korea's property market has been in a long slump with a sharp drop in home purchases hurting local builders and affecting development-related investment.
"If implemented, the new actions are expected to rejuvenate the local housing market as well as stabilize rent-related costs," said Construction Minister Kwon Do-youp.
Under the plan, Gangnam, Seocho and Songpa districts in Seoul will all be freed from transaction restrictions imposed since 2003. This move affects the debt-to-income and loan-to-value ratios of home-backed borrowing for these districts.
The government will also lower the capital gains tax for people who have more than one home so they will only be levied "regular" rates of 6-38 percent instead of the much steeper 50 percent and 60 percent slapped on sales in the past.
Those who resell a home within a year of purchase will be taxed 40 percent of the profit generated from the sale, down from 50 percent, while those that sell their property within two years will pay conventional rates.
Seoul had previously levied higher taxes on people who did not own a home for more than three years to discourage property speculation, cited for pushing up prices in the past.
For owners of just one home, the government will not levy a transfer tax if the seller owned the property for more than two years, down a full year from the present minimum. This rule will go into effect as of June.
Government policymakers said the new changes will be forwarded to the National Assembly for approval. Once approval is given, the policies will be implemented.
The latest moves, in addition, outline measures to make it easier for people to take out loans or receive loan guarantees when buying homes, with the red tape governing so-called remodeling of existing homes to be eased in the hope it will result in more contracts for local builders