Hi! I hope you guys have waited for me to write blog posts. I kind of suffered from mid-term exams, which did not allow me to write a post. As the exams are all done now, I will bring up some interest financial and economic issues.
For today, I would like to talk about an issue related to my previous post about a month ago. Do you remember the fact that the Korean National Congress legislated a policy exempting acquisition and transfer tax? As my previous post introduced this new policy, today’s post is focusing on the expected outcomes to be derived from this policy.
It’s been more than a month since the policy was legislated and came into action. Of course, we cannot decisively judge the policy outcome after just a month of implementation period. It takes a while for a policy to influence over various sectors in the financial system.
The exemption of acquisition and transfer tax came into effect as of 24th of September. However, according to real estate agents and experts, there is not a remarkable change after the policy being implemented. In other words, the exemption of acquisition and transfer tax did not appear to be a great merit for the home buyers, which did not lead to a growing number of transactions in real estate market. For example, there was absolutely no housing transaction for Eumma Apartment located in Gangnam-Gu, Seoul. This is quite surprising, as Gangnam-Gu is one of the districts where there are lots of residential transactions.
According to the data provided by the Ministry of Land, Transport and Maritime Affairs published on 30th of October 2012, there were 36,050 transactions in real estate market. The data shows the number of transactions since 24th of September 2012, at the time when the exemption policy was implemented.
Indeed, this is not a small number. However, we should be aware of that, in general, autumn is the typically popular season for people to move in and out. Keeping this fact in mind, we cannot really recognize how effectively the exemption policy works. ‘Who is actually going to buy a house just because he/she will receive the benefit of exempting acquisition and transfer tax?’, one real estate agent said in an interview. Right, decision to purchase a house is involved with far more complicated factors. Moreover, the sellers are demanding higher prices for their properties, as they know that home buyers have a greater purchasing power with acquisition and transfer tax being exempted.
Yes, just like any other policies, we need to wait a bit longer to see a broader and fuller scope of policy implementation. It is too early at the moment to judge whether this policy is designed in a right direction. Also, we should be mindful about that the Korean real estate market is in such a deep stagnation, which leads to a low level of demand for properties.
The government, in cooperation with other related financial institutions, is trying their best to settle down the tax exemption policy in numerous sectors in economy. Also, government is trying to be equipped with other feasible back-up plans for the exemption policy. For now, let ourselves updated about how the policy is working! Later on, we will see the full effects of the policy implementation!