Jeonse Extinction Theory and Stricter Taxes on Multiple-Home Owners: Key Points of July Tax Reform and Impact on Non-Homeowners
As the government defines the jeonse system as private financing and predicts its long-term extinction, a massive tax reform in July including stricter taxes on multiple-home owners is expected to cause a significant shift in the real estate market.
Summary: The possibility of the long-term extinction of the jeonse system was officially mentioned during the presidential inauguration speech, causing significant ripples in the market. Alongside this, the government has announced a massive real estate tax reform scheduled for July, which will significantly increase the tax burden on multiple-home owners with the goal of 'eradicating speculation.'
Background of the Jeonse Extinction Theory and the Government's Perspective
The hottest topic in the real estate market right now is undoubtedly the 'Jeonse Extinction Theory.' The government has defined the jeonse system as a 'unique private financing system that only exists in South Korea' and pointed to it as the cause of various market distortions, including jeonse fraud. This reflects a strong intention to interpret the recent decrease in jeonse supply and rising prices as a 'normalization process' transitioning from a jeonse-centric market to a monthly rent and public housing system.
In particular, judging that jeonse loans stimulate speculative demand such as gap investment and act as a trigger for rising housing prices, additional loan regulation cards are being discussed, such as strengthening jeonse loan regulations and reducing guarantee limits for non-resident single-home owners and multiple-home owners.
Core of the July Real Estate Tax Reform: Pressuring Multiple-Home Owners
The core target of the tax reform bill to be announced this July is multiple-home owners. The government's policy is to strictly protect single-home owners for residential purposes, but to realize holding taxes and capital gains taxes for investment-purpose multiple-home owners to the level of advanced Western countries.
- Realization of Holding Tax: The plan is to significantly increase the holding burden on multiple-home owners by raising the effective real estate tax rate, including comprehensive real estate tax and property tax.
- Reorganization of Special Deduction for Long-Term Holding: A residence-centric taxation system that grants benefits proportionally based on 'actual residence period' rather than simple holding period is highly likely.
Experts point out that if this tax reform is implemented, it could accelerate the release of properties by multiple-home owners onto the market, but at the same time, there are concerns that the increased tax burden could be passed on to tenants through increased monthly rent.
Frequently Asked Questions (FAQ)
Q. Will jeonse really disappear completely?
It is difficult for it to disappear completely in the short term. However, due to stricter loan regulations and stricter guarantee insurance standards, the phenomenon of jeonse converting to monthly rent (semi-jeonse) is expected to accelerate further. The market will undergo gradual structural changes.
Q. Will the July tax reform be advantageous for non-homeowners buying a house?
If multiple-home owners' urgent sales enter the market, temporary price adjustments may occur, providing an opportunity for non-homeowners. However, if accompanied by overall stricter loan regulations, it could actually become more difficult for non-homeowners with weak cash mobilization ability to raise funds, so a meticulous financial plan is essential.