Table of Contents
Local Real Estate Investment: A New Path Opens
Starting January 2, 2025, when purchasing residential properties located in the local area with a publicly announced price of 200 million won or less, only the basic acquisition tax rate of 1% applies, regardless of the number of existing houses owned.
This system includes the exemption from the additional tax rates of 8-12% that were previously imposed on multi-homeowners and corporations, which can be seen as an effort to revitalize the stagnant local housing market.
This policy applies to metropolitan areas outside the capital region and is expected to have a positive impact on the demand for purchasing low-priced investment housing or small apartments for actual residence in the local area. These changes are likely to provide new opportunities in the local real estate market.
Key Summary of the Policy and Future Market Outlook
The recently announced amendment to the Local Tax Act's enforcement decree is designed to invigorate the local housing market while also promoting housing stability for the working class. These measures are necessary now more than ever.
It is noteworthy that, after January 2, 2025, the additional acquisition tax rate does not apply to residential properties with a publicly announced price of 200 million won or less. In this case, only the basic rate of 1% is applied, and such properties are excluded from the count of total residential units.
This policy applies across the non-capital area and includes metropolitan cities as well. The same rules apply to corporations, but the benefit of exclusion from the count of total residential units does not apply. For properties without a publicly announced price, the standard pricing reference table or market standard value is used to determine the price.
This amendment will serve as an important turning point that can provide new opportunities not only for actual users but also for multi-homeowners. These changes are expected to increase transaction volumes and invigorate the local small to mid-sized apartment market.
Changes Seen Through Actual Application Cases
Under the existing tax system, owning more than three residential units in non-adjustment areas incurs an acquisition tax of 8%, and owning more than four units incurs a tax of 12%. This has resulted in a significant tax burden of tens of millions of won even when purchasing one additional low-priced property.
However, under the newly implemented amendment, for example, if an apartment with a publicly announced price of 150 million won is purchased for 200 million won, the acquisition tax is dramatically reduced from the previous 16 million won (200 million × 8%) to 2 million won (200 million × 1%). This could result in tax savings of over 10 million won in certain cases.
Additionally, the residential properties with a publicly announced price of 200 million won or less that are acquired after January 2, 2025, will be excluded from future residential unit counting, thus broadening the scope for additional tax rate applications. These changes are expected to positively impact property owners.
Real Opportunities in Local Gap Investment and Monthly Rent Investment Strategies
The content of this amendment has garnered significant attention, especially from multi-homeowners considering gap investment and monthly rent investment strategies in the local real estate market.
Even when the publicly announced price is under 200 million won, the actual transaction prices often range around 300 million to 350 million won.
In such situations, it is quite feasible to consider buying a property at a low price using jeonse and then converting it to monthly rent.
When considering a real estate transaction, it is important to check beforehand as publicly announced prices are often set lower than actual transaction prices. You can easily obtain related information by accessing Naver Real Estate, entering the specific property number, and clicking on the 'publicly announced price' tab.
Especially for large complexes with low-rise buildings, properties with publicly announced prices under 200 million won can be found unexpectedly. Many low-rise units also exist in large apartment complexes or newly built apartment complexes located in certain city centers of Busan.
In this regard, it can be advantageous for investors to strategize using affordable properties in stable real estate price areas. This approach can provide excellent opportunities to enhance long-term investment performance.
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