Policy Momentum for Construction Sector
The author is an analyst of NH Investment & Securities. He can be reached at minjae.lee@nhqv.com. -- Ed.
Last week, the main opposition party’s presidential candidate, SY Yoon, pledged to supply 2.5mn units of housing during his term of office, including 300,000 units for young non-homeowners and 200,000 housing units near subway stations for non-homeowners. He also proposed to overhaul reconstruction/redevelopment systems and tax systems. With presidential candidates likely to keep proposing new real estate measures, the construction sector should enjoy steady policy momentum going forward.
Presidential candidate SY Yoon’s real estate policies
Last week, the main opposition party’s presidential candidate, SY Yoon, pledged to supply 2.5mn housing units or more during his term of office, out of which 300,000 units are to be 85m² or smaller houses to be built on public lands for young non-homeowners. Under this scheme, young non-homeowners can obtain at cost the right to buy a house, and once they live there for five years or longer, they are entitled to sell it to the government and pocket up to 70% of the proceeds. The presidential candidate also proposed plans to supply 200,000 housing units near subway stations for non-homeowners. Under this scheme, he plans to raise the floor area ratio from 300% to 500% for reconstruction projects on private lands, and set aside 50% of the increased space (stemming from the higher floor area ratio) for public donation.
And, Yoon announced overall regulation easing measures, including revamping housing loan regulations, reviewing the comprehensive real estate tax, and lowering the capital gains tax. He also mentioned improving systems to pick up speed for reconstruction/redevelopment projects, but details were not disclosed.
Pledging to solve real estate issues among other things, candidates from the opposition party are expected to take a different path from the real estate policies of the Moon’s administration. As their policies are likely to include easing tax regulations for reconstruction/redevelopment projects that are usually carried out by large construction companies, they should create positive momentum for the construction sector. The related momentum will likely sustain through October, at which time both the ruling party and the opposition party are to select their final presidential candidates in their respective primary elections.
Key construction/real estate news from last week
On Aug 27, a local tax revision bill that would have imposed a new regional development tax on cement makers failed to pass the subcommittee. The bill of imposing roughly W50bn per year on seven major cement makers has been devised to impose W1,000 tax on one ton of cement and to spend the tax money for local development. The proposed bill sparked an immense backlash from the cement industry, which argued that it meant double taxation as they are already paying local resource facility taxes in the process of mining limestone, a raw material for cement. A revised version of the bill will be discussed at the regular National Assembly meeting next month.