Korea Raises Rate After 3.5 Years, Starting Tightening Cycle

*Editor's Note: 'AI PRISM' (Personalized Report & Insight Summarizing Media) is an 'AI-based personalized news recommendation and summary service' developed with support from the Korea Press Foundation. It selects and provides six customized news items by reader type.

1. Rate Hike After 3.5 Years... Tightening Clock Ticks Again

Key Summary: The Bank of Korea raised its base rate by 0.25 percentage point from 2.5% to 2.75%. BOK Governor Shin Hyun-song explained the reason for the hike, saying "the inflation rate is expected to exceed the target level for a considerable period, and financial risks are also persisting," and the decision was made unanimously by all seven Monetary Policy Board members. As the Middle East war drags on, the consumer price inflation rate recorded the 3% range for two consecutive months in May and June, and June import prices surged 20.6% from a year earlier, with additional upward pressure continuing. Market attention has shifted to whether the August Monetary Policy Board meeting will bring consecutive hikes, and Korea Investment & Securities forecast that "raising the rate in August could help stabilize inflation expectations."

2. "Only the Cash-Rich Buy Homes"... Pressure Grows on Authorities to Ease Volume Regulation

Key Summary: Half of the 1,104 submissions to the government's online forum, or 562, were concentrated on demands to improve housing finance regulations. The main demands were for creating loan quotas for first-time and homeless genuine buyers, and preparing transitional measures for sudden limit reductions after contracts are signed. The FSC chairman stated just before the forum that "there is no plan to ease the 1.5% growth target," and while maintaining the volume framework, a plan is under review to exempt loans for newlyweds and the near-poor from the volume cap. Professor Kim Jung-sik of Yonsei University pointed out that "it is difficult to rein in home prices through volume regulation while leaving supply, the root cause, unchanged."

3. "Convert Comprehensive Real Estate Tax to Long-Term Residence Deduction... Temporary Easing of Capital Gains Tax for Single-Home Owners"

Key Summary: At the Ministry of Economy and Finance tax forum, a proposal was made to change the current long-term holding tax credit under the comprehensive real estate tax to a basis of actual residence period. Professor Shim Chung-jin of Konkuk University proposed applying 10% for five years or more of residence, raising it by 10 percentage points every five years thereafter, up to a maximum of 40% for 20 years or more, while lowering the combined ceiling with the elderly deduction from the current 80% to 60%. In the capital gains tax area, a proposal also emerged to grant non-resident single-home owners a two-to-three-year grace period and apply reduction benefits for sales within that period to encourage properties to come onto the market. The government is set to announce its tax law revision bill late this month.

4. Bull Market Continues in Semiconductor Belt, Byeongjeom, Gwonseon and Giheung Catch Up

Key Summary: As the surging leaders such as Hwaseong's Dongtan district (1.29%→0.73%) and Suwon's Yeongtong district (1.19%→0.64%) lose momentum, buying interest is shifting to adjacent areas such as Hwaseong's Byeongjeom district (0.25%→0.32%), Suwon's Gwonseon district (0.26%→0.32%), and Yongin's Giheung district (0.56%→0.59%). Woori Bank researcher Nam Hyeok-woo explained that "as demand shifts to areas like Giheung district, where relatively cheaper apartments are concentrated, the rate of increase is widening." In Seoul, the 14 districts of Gangbuk (0.35%) outpaced the 11 districts of Gangnam (0.26%), with Seongbuk district recording the highest increase at 0.49%.

5. Easing Development in Gangbuk and Southwest... Seoul City's 'Half-Price Card'

Key Summary: The Seoul Metropolitan Government has prepared a revision to its urban planning operation guidelines that lowers the public contribution rate from the existing 60% to 30% for 11 autonomous districts including Seodaemun, Geumcheon, Guro, and Gangseo, and permits residential ratios of up to 90%. As a measure to resolve the concentrated structure in which Gangnam's three districts account for 15 (65%) of the 23 sites currently pursuing preliminary negotiations, analysts say the likelihood of successful development of large sites that had previously failed to sell, such as the former National Institute of Health site in Eunpyeong district (48,000㎡, appraised value 454.5 billion won), has increased.

6. Oh Se-hoon Visits Yeongdeungpo, "27,000 Units to Be Supplied in Semi-Industrial Areas Alone"

Key Summary: Seoul Mayor Oh Se-hoon announced plans to supply 27,000 units at 32 complexes in southwestern semi-industrial areas. As a result of easing the floor area ratio from the existing 250% to a maximum of 400%, the Yangpyeong Shindonga Apartment increased by 199 units from 563 to 762 units, lowering the contribution burden on association members. The Seoul Metropolitan Government plans to shorten the period from project implementation plan approval to construction start from the existing five years to four years, aiming to support a construction start in October 2029.