An apartment complex in Eojin-dong, Sejong, around the government complex (The Korea Herald)

SEJONG -- The Yoon Suk-yeol administration on Tuesday unveiled the first batch of real estate measures, lowering tax burdens for first-time homeowners and expanding tax deductions for tenants, in what was the first step to realize its campaign pledge to “normalize” the housing market.

The government will come up with detailed measures on the supply of 2.5 million homes and more no later than August.

At a joint briefing, First Vice Minister of Economy and Finance Bang Ki-sun said the measures are aimed at “normalization” of the market, rather than price stabilization. He said home prices have been stabilized amid rising interest rates and policies spurring multiple-home owners to sell.

“(In past years), regulations-centered policies and the imbalance between demand and supply in major regions had distorted the real estate market,” he said.

The government also vowed to lift the presale price cap imposed on private apartments and offer up to 180 million won ($139,211) per loan for those who opt for new “jeonse” contracts before their four-year contracts expire. The range of a jeonse loan is currently limited to 120 million won. Jeonse is a housing lease system unique to Korea whereby tenants pay a lump-sum deposit instead of monthly rent on a two-year contract.

With the eased regulation, owners of one home who took out mortgages in speculation-prone districts to buy a new home are allowed to continue to own their previous home for up to two years, officials said. The former administration obliged them to sell their previous homes within six months.

Though they will temporarily become two-home owners in this arrangement, the taxation authority would not levy aggravated taxes on them during the two-year grace period. With the extra time, officials said this will also help protect tenants’ rights.

To ease the tax burden, first-time homebuyers will be exempted from property acquisition taxes of up to 2 million won, regardless of their annual income and property price. They will only be subject to taxes exceeding 2 million won in proportion to their property price.

Officials predicted that the number of households that will benefit from the eased rule will be extended to 256,000 per year from 123,000. The previous administration offered the benefit only to low-income households, who buy relatively low priced apartments.

For housing supply, the Land Ministry said it would announce details on providing more than 2.5 million apartment units across the country in July or August. The supply policy was a main campaign pledge of President Yoon earlier this year.

The government also plans to unveil another supply plan for newlyweds and young people with details to come this August or September.

Officials will also announce adjustments to the government-led designation of speculation-prone areas -- such as all of the 25 districts in Seoul and Sejong -- later this month.

In addition, policymakers plan to revise the system of placing a cap on initial apartment prices, which had brought about a variety of problems and conflicts due to a wide price gap with neighboring apartments.

The cap on initial home prices had frustrated builders. Despite a hike in construction materials, they were unable to raise home prices due to the regulation.

The financial authority will move to arrange state-led loan products, which will alleviate interest burdens on low-income households amid a spike in benchmark rates.

By Kim Yon-se (kys@heraldcorp.com)