According to the party on Sept. 15, Rep. Moon Jin-suk is preparing an amendment to the Restriction of Special Local Taxation Act that would raise the acquisition tax break threshold for completed but unsold apartments outside the greater Seoul area to 700 million won or less in acquisition value from the current 600 million won or less. He plans to introduce the bill this month.
"Despite years of special measures for unsold apartments in provincial areas, the problem has only grown more serious," Moon said. "The special provisions need to be improved in the direction of expanding the benefits."
With the People Power Party also calling for broader tax benefits for unsold provincial apartments, observers say the bill has a strong chance of passing. Rep. Lee Sung-kwon of the People Power Party held a forum at the National Assembly on Sept. 9 titled "Provincial Real Estate Mired in Unsold Housing: What Is the Solution?" and said, "Balanced national development is difficult without solving the provincial real estate problem." Along with stronger tax benefits, he called for easing mortgage regulations in provincial areas, strengthening housing finance for genuine local homebuyers, and sustaining and expanding project financing support for small and mid-sized provincial construction firms.
The push to raise the threshold reflects the growing number of provincial apartments with acquisition values above 600 million won as construction material prices have risen amid the Middle East war and other factors. An official at Moon's office said, "The existing 600 million won threshold has only a limited effect on clearing unsold units. The government extended the sunset on the existing system, but without raising the acquisition value ceiling, unsold inventory will keep rising."
Earlier, as unsold inventory in provincial areas continued to pile up, the government proposed extending by one year, to the end of 2027, the acquisition tax break for completed but unsold homes outside the greater Seoul area, which had been set to expire at the end of this year. But it froze the price threshold at 600 million won.
The unsold housing problem in provincial areas is indeed worsening. According to the Ministry of Land, Infrastructure and Transport, completed but unsold homes nationwide totaled 29,152 units at the end of July, up 1.1% from the previous month. Of those, 24,708 units, or 84.8% of the total, were outside the greater Seoul area.
Separately from tax support, officials are also reviewing a plan to link the second round of relocating public institutions to provincial areas with efforts to clear unsold housing. Under the plan, Korea Land and Housing Corp. and other agencies would buy or lease unsold homes in areas receiving relocated institutions and use them as housing for the employees of those organizations. The idea is to use tax incentives to encourage private purchases of unsold units while also tapping the new housing demand created by the relocations.
Rep. Park Yong-gap of the Democratic Party proposed such a plan to the government at the National Assembly's Special Committee on Budget and Accounts on Aug. 24. Because housing will be needed to help employees settle during the second round of public institution relocations, using unsold apartments in those areas could resolve both the housing needs of relocated staff and the provincial unsold inventory problem, he argued.
The Bank of Korea has offered a similar view. In a recent research report on the housing market in North Jeolla Province, the central bank's Jeonbuk branch suggested that if the province is included among the destinations for the second round of public institution relocations, authorities could consider offering unsold homes in the province to incoming residents through special sales backed by a housing buyback guarantee program.
The government also plans to address provincial unsold housing by linking it to balanced regional development policies such as public institution relocations and the creation of mega special zones. In written answers submitted to the National Assembly, Hong Ji-sun, the nominee for land minister, said, "We will simultaneously pursue the second round of public institution relocations, completion of the administrative capital, the five-pole three-special-zone framework and the three mega projects to fundamentally improve living conditions and strengthen competitiveness."
