Lee Hyung-il, nominee for deputy prime minister and minister of fiscal and economic affairs, said the government is in talks with related ministries to build a system for buying up public housing in bulk. The move follows President Lee Jae-myung's instruction to prepare a home-purchase program in case housing prices crash.
"Historically, the property market has struggled when interest rates rise," the nominee said at a press briefing at the Government Complex in Sejong on the 2nd. "Household splits have been driving the market even as the population declines, but we need to think about how long that will continue, and if it does not, what will happen to the housing market over the long term." His remarks echoed the president's view that home prices in South Korea are likely to trend lower over time.
He identified expanding housing supply as the key to stabilizing the property market. "The most important thing for the property market to stabilize is that the volume of housing supply increases," he said. "If it can boost supply, there is no reason to rule out anything, whether tax measures or financing."
On the revision to the comprehensive real estate holding tax law passed by the Cabinet the previous day, which raised the basic deduction for owners of a single home who do not live in it to the current 1.2 billion won from the originally proposed 900 million won, he said, "The market gave us a lot of feedback that the gap between owner-occupiers and non-occupants was somewhat excessive."
"Establishing a residence-centered housing market is the consistent direction the government has in mind," the nominee said, signaling that the tax gap between non-occupants and owner-occupiers will be narrowed but not eliminated.
The comment effectively rejects calls from some in the ruling party to scrap the distinction between non-occupants and owner-occupiers and raise the basic deduction for single-home owners to a uniform 1.4 billion won.
He left room for further changes, however, saying, "If there are specific discussions in the National Assembly, we plan to reflect them where necessary and where they are reasonable."
On a tax overhaul that would define criteria for presumed share-price suppression and levy taxes on stock valued at least 30% higher in such cases, he said, "There is a question of whether revising the inheritance and gift tax law alone can resolve share-price suppression," adding that comprehensive capital market development, including institutionalizing the bear hug strategy, should come first.
A bear hug is a strategy in which a would-be acquirer publicly offers to buy shares above the market price to pressure a company into a sale. "If a share price is excessively low, takeover threats will come, and making companies not free from that threat is itself helpful to capital market development," the nominee said.
"I will do my utmost to stabilize prices, with the mindset that grocery prices are the economic team's report card," he said, hinting at additional measures on prices ahead of the Chuseok holiday.
Separately, the nominee said he would create a new economic affairs consultation meeting for economic ministers and the presidential office to coordinate major policies, and would strengthen the preliminary review and coordination functions of the existing ministerial meeting on the economy.
