Apartment complexes, housing and commercial units surrounding the new presidential office in central Seoul’s Yongsan are seen from Namsan on May 31. (Yonhap)
The government on Tuesday vowed to relax regulations on loans for “jeonse” home rentals and to raise tax deduction rates for monthly rental contractors in a move to help ease financial burdens on tenants and stabilize the housing market.
Under the Yoon Suk-yeol administration’s first package of measures on the property market, the government also pledged to reform the presale price cap scheme imposed on private apartments and offer a tax cut to landlords who sell their homes after long-term leases in a move to expand the housing supply.
The Yoon government has vowed an overhaul of the real estate policy, saying the previous government’s pursuit of tougher regulations and heavier taxes to curb speculation rather caused a surge in housing prices.
In detail, the government decided to give tax incentives to landlords who voluntarily raise rentals by less than 5 percent, according to the finance ministry.
Up to 180 million won ($139,211) of loans will be available for those who need to make a new “jeonse” contract within a year after the expiration of their four-year contracts. Currently, the maximum amount came to 120 million won.
Under South Korea’s decades-old jeonse system, tenants pay a large lump-sum deposit, known as key money, to the landlord, which is then returned at the end of the rental agreement, which usually lasts two years. During the lease period, the tenants do not pay monthly rent.
The government will also raise the tax deduction rate for monthly rentals to the maximum 15 percent from the current 12 percent.
The limit of income tax deduction for repayment of home rental loans will also be extended from 3 million won to 4 million won.
The government vowed to come up with a detailed road map to supply more than 2.5 million units of new homes by mid-August, or within 100 days of the launch of the new administration.
A comprehensive plan designed to better support young people and middle-class households with their home purchases will also be devised within this year.
“As short-term risks remain in the lease market, the government seeks to make pre-emptive responses by extending tax and financial benefits, and boosting supplies,” Finance Minister Choo Kyung-ho said, presiding over a meeting of real estate-related ministers. (Yonhap)