SEOUL, Aug 2 (Reuters) - South Korea will raise capital gains taxes on owners of multiple homes to rein in speculators who policymakers blame for stoking a housing market bubble across Seoul, Busan and other parts of the nation.
Starting from April 2018, those with two homes in the designated regions will face 10 percentage point of additional capital gains tax, on top of the current tax rates ranging from 6 percent to 40 percent depending on the size of profits, the government said in a statement on Wednesday.
Those with more than three homes will face an additional 20 percentage point tax on top of the existing levy.
The proposed changes in capital gains tax needs to be approved by lawmakers.
The latest property market curbs are the third in 10 months as policymakers put speed bumps to try to cool the overheated sector. Mortgage rules announced in June and other restrictions in November last year have failed to stabilize prices.
Household debt is currently at a record high, a headwind for growth as it crimps private consumption and potentially exposes the economy to a sharp down turn in the event of a housing market collapse.
Regulators are also concerned speculators could drive up property prices beyond the reach of first-home buyers and those in low-income category.
“Residential properties shouldn’t be investment products but a home, and any speculative demand should be curbed,” the government said in the statement.
The average price of a Seoul apartment in March exceeded 600 million won ($534,616.41) for the first time, an increase of more than 20 percent from four years earlier.
Effective July 3, the government tightened loan limits for home buyers in regions showing signs of overheating, including Seoul.
Even so, apartment prices in Seoul rose 4.81 percent from a year earlier in July, while prices nationwide increased 1.6 percent, data from Koomin Bank shows.
Wednesday’s measures also designate all of Seoul and parts of the outskirts of the capital as ‘overheating zones,’ which will be subject to tighter mortgage rules.
Loan limits for home buyers in Seoul and its outskirts will be tightened to 40 percent of a property’s value, down from 60 percent.
Debt repayments will also be limited to 40 percent of home buyers’ annual income in those selected regions, down from the current 50 percent, it said.
Within Seoul, those investing in the affluent Gangnam district as well as Mapo, and Yongsan will face even tougher mortgage rules and resale restrictions.
Details on when the fresh mortgage rules will kick in will be decided before year-end, the government said. Unlike the proposed changes in capital gains taxes, the new mortgage rules don’t need parliamentary approval.
$1 = 1,122.3000 won Reporting by Cynthia Kim; Editing by Shri Navaratnam
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