The areas where a person who owns a house in Seoul can still be recognized as a single homeowner even after purchasing an additional house are expanding to nine regions, including Gangneung, Sokcho, Iksan, Gyeongju, and Tongyeong. Additionally, the tax benefits applied to acquiring so-called ‘problematic unsold’ housing after completion in local areas are extended for another year.
On the 14th, the government announced these measures, titled ‘Strengthening Local Construction Investment Plans,’ during an economic ministers’ meeting chaired by Gu Yoon-cheol, Deputy Prime Minister and Minister of Economy and Finance, at the government complex in Seoul.
This year’s decline in the local construction market is cited as the major reason for the sluggish domestic economy. Construction investment has been declining for five consecutive quarters recently, and the downturn in the local housing market and the project financing (PF) distress are severe. Thus, the government has devised measures to stimulate the frozen local construction market by supplementing local real estate demand and aiding the swift execution of public SOC investments.
Initially, tax burdens on housing purchases will be eased, focusing on areas with declining populations. Nine areas interested in population decrease will be added to the original 84 population-declining regions where additional housing purchases will retain the benefits of being recognized as a single homeowner for capital gains tax, comprehensive real estate tax, and property tax.
The added regions include Gangneung City, Donghae City, Sokcho City, Inje County in Gangwon, Iksan City in Jeonbuk, Gyeongju City, Gimcheon City in Gyeongbuk, Sacheon City, and Tongyeong City in Gyeongnam.
In 80 non-metropolitan areas with declining populations, the value limit for second homes is being relaxed. The current price limit for capital gains tax, comprehensive real estate tax, and property tax benefits will be increased from 400 million won to 900 million won, and the acquisition tax benefits will increase from 300 million won to 1.2 billion won.
To boost local housing demand, tax support for rental housing in areas with declining populations will also be strengthened. The 10-year lease of privately owned acquisition apartments will be temporarily reinstated for one year, and the related rental housing will be excluded from intensive capital gains tax scrutiny.
All private rental housing in areas with declining populations (6 years and 10 years) will, for one year, be temporarily exempt from increased acquisition tax (for acquisitions) and be excluded from the housing count for acquisition tax purposes (for construction/acquisitions).
Measures for the acquisition of problematic unsold housing are also prepared. The special benefits that allowed one family, one household tax benefits for capital gains, comprehensive real estate, and acquisition taxes for households acquiring unsold housing after completion in non-metropolitan areas will be extended from 2025 to 2026. These homes will also be excluded from the housing count when heavy capital gains or comprehensive real estate taxes apply until 2026.
A temporary measure for one year will implement a heavy acquisition tax exemption for unsold housing post-completion in non-metropolitan areas, with up to a 50% reduction in taxes.
To activate CR-REITs (corporate restructuring real estate investment trusts) that purchase problematic unsold housing, additional corporate capital gains tax on unsold housing post-completion will be waived. Existing participating investors will also benefit from tax incentives during the support period.
Public purchases of local unsold housing will also be expanded. The number of unsold houses directly purchased by the Korea Land and Housing Corporation (LH) post-completion will increase from 3,000 units in 2025 to an additional 5,000 units in 2026, totaling 8,000 units. The purchase price ceiling will be raised from 83% to 90% of the appraised value.
Regarding ‘safe repurchases’ where the Housing and Urban Guarantee Corporation (HUG) provides liquidity support to unsold pre-completion projects and grants repurchase rights to construction companies, HUG’s acquisition, property, and comprehensive real estate taxes, along with acquisition taxes for project operators during repurchase, will be exempted to alleviate project burdens.