The government has unveiled another set of measures in helping the housing market, including cutting the levy on profits made from home sales by multiple homeowners from 50% - 60% to 6% - 35%. This is the third installment of housing market boosting measures by the government, following the slashing of home purchase taxes in March 2011 and the easing of real estate lending restrictions in August 2010.
The key rate interest rate has been unchanged at 3.25 from June 2011. The rate has attracted borrowers, with 2011 apartment building sales rising 41.8% to 285,000 units. The measures also helped construction permits rise 42.2% to 549,594 permits, according to the Ministry of Land, Transport and Maritime Affairs (MLTM). Household debt rose to 12.7% during the year to March 2011.
South Korea’s economic growth slowed to 3.6% in 2011, after 6.16% in 2011. Inflation remains high at 4.16%.
Analysis of South Korea Residential Property Market »
Because of the difficulty of finding buying prices, we have no gross rental yields figures for Seoul.
If the rental income is less than KRW24 million (US$21,487) and the property value is assumed to be under KRW900 million (US$805,751), a special method for the calculation of the personal taxable income is used. In the sample calculation provided, effective income tax amounts to 2.48% of the gross rent, given that the annual rental income is KRW20.7 million (US$18,532) and under certain assumptions.
Capital Gains: Capital gains taxes are around 6% to 38%. A special deduction applies if the property is held for more than three years.
Inheritance: The inheritance tax is between 10% and 50% depending on the property value.
Residents: Residents are taxed on their worldwide income at progressive rates, from 6% to 38%.
Key Money: With any of the standard rental schemes, the landlord receives a huge amount of money up front, protecting him from erring tenants. In the 'wolse 2' system (the most common for expats), the entire rent is paid upfront, with no refund for early termination.
Tenant Security: Tenants are expected to move out of the property as soon as the lease term expires and the key money returned.
To slow the won’s rise the government increased foreign reserves, and by December 2011 the won was back down to US$1=KRW 1,148.30.
The Bank of Korea’s key rate hike to 3.25% of June 2011 is likely to be maintained to prevent further currency depreciation, which could heighten inflationary pressures.