It will be interesting to see if landlords do drop rents when these property taxes are frozen or just pocket the extra income:
The government is expected to freeze property tax for the entire homeowners including owners of one expensive home with an officially appraised value of over 1.1 billion won ($905,000) subject to the Comprehensive Real Estate Tax, according to government ministries, Sunday. The hefty Comprehensive Real Estate Tax is imposed for retaining expensive homes.
Korea Times
The measure is part of the real estate market policy revisions pledged by President-elect Yoon Suk-yeol, whose win by a razor-thin margin was underpinned in considerable part by public fury over the housing prices doubling under the Moon Jae-in administration due to two dozen botched government policies.
Higher housing prices led to a tax spike for homeowners, almost all of whom passed the unexpected burden to tenants in the form of higher rent, threatening their stable living arrangements.
You can read more at the link, but it will also be interesting to see what losing all this property tax revenue will do to the national budget.
This is good news if you are a property owner in Seoul, but not good news for anyone trying to find a place to live:
The average sales price of apartments in Seoul has nearly doubled under the Moon Jae-in government, a civic group said Wednesday.
The Citizens’ Coalition for Economic Justice announced the results of its study that has tracked the prices of 115,000 units in 75 apartment complexes since President Moon took office four years ago.
The average price of a 99-square-meter apartment in Seoul rose to 1.19 billion won (US$1.04 million) from 620 million won from May 2017 to May 2021.
The rise in apartment prices was found to be 192 times the rise in net income, which grew by an average of 2.98 million won during the same period.
Yonhap
You can read more at the link, but a 99 square foot apartment is about 1,065 square feet that people in Seoul have to pay over $1 million dollars to afford. It is understandable why people in Seoul are upset about the high cost of housing.
It appears there are more problems with the quality of work done constructing the new buildings on Camp Humphreys:
A 10-year-old girl was stuck in an elevator for 45 minutes before somebody heard her screaming and called for help, her mother said.
Stars & Stripes
Soldiers complained about mold and temperature control problems in the barracks.
Residents of Camp Humphreys gave commanders an earful Friday during a town-hall meeting about housing woes on the U.S. military’s new headquarters base in the rural area of Pyeongtaek, about 55 miles south of Seoul.
Military and housing officials, who seemed surprised by the severity of some of the complaints, responded swiftly by sending people to check on the situation the next day.
But many in the audience asked how the problems were allowed to occur considering many of the facilities are new and touted as state of the art.
The meeting, held in the Four Chaplains memorial chapel, was part of a military-wide outreach effort seeking feedback from soldiers and their loved ones following congressional testimony and media reports revealing dangerous conditions on bases in the United States.
Here is what the USFK Commander had to say about this, which was essentially don’t blame us, but we are trying to fix it:
U.S. Forces Korea commander Gen. Robert Abrams explained that the Army Corps of Engineers, which oversaw the expansion project, could not do quality checks until 80 percent of the project was complete according to the bilateral agreement.
The hospital and some other facilities have failed that test in the past, forcing the builders to go back and fix things even if that meant starting from scratch.
“We’re actually at the mercy, if you will, of those contractors,” he told the audience.
The four-star later clarified that he understands why South Korea wanted the oversight since it is making such a huge investment in the base.
“We can provide feedback, which we do. We have direct access and we’re pretty aggressive about it,” he told Stars and Stripes. “I was really driving home the point that this is not the garrison’s fault and it’s not our Corps of Engineers’ fault.”
You can read more at the link, but the Camp Humphreys expansion project has been plagued by corruption scandals over the years so the fact Soldiers are dealing with apparently poor construction should not be too surprising to everyone.
For servicemembers who rely on their BAH for some extra cash by living in a smaller home than what you could afford with your stipend, get ready because Congress is coming to take that money from you:
Senate lawmakers want to radically overhaul how military housing stipends are awarded and end the practice of troops pocketing extra cash from the payouts.
The plan is tucked into the Senate’s pending draft of the annual defense authorization measure, and hasn’t received the same attention as major military health care and acquisition reforms also included in the legislation.
But it has the potential to change housing stipend totals for nearly every service member in coming years, with some potentially losing hundreds of dollars a month. And it comes after a series of pay and benefits trims in recent years that have left advocates frustrated about increased financial strain on military families.
Instead of the current Basic Allowance for Housing system, which assigns flat-rate stipends for zip codes across the country based on troops’ rank and family status, the new proposal would move closer to the military’s Overseas Housing Allowance. That system sets maximum payable stipends but awards troops only for their actual expenses, making recipients provide proof of what they pay in rent and utilities costs.
Dual military couples and service members who room with friends would not be able to game the system either. They’d see their individual stipend cut in half, adjusted to cover just their actual costs and nothing more. [Military Times]
You can read more at the link, but this will do little to save any money and instead take money from troops to give to realtors. I would not be surprised if the real estate lobby is behind this change. That is because what will happen is that the realtors will make sure the rent for a home matches what the servicemembers maximum BAH rate is. This will in turn drive up rental rates across the city as well which will bring in more money for realtors from civilians trying to find a place to rent.
This already happens in Korea with the Overseas Housing Allowance (OHA) which has led to realtors being put off limits for colluding with property owners. I also wonder how this affects servicemembers who own homes? Will they be allowed to use the BAH to pay their mortgage? What if they have the house paid off? Will they have their BAH cancelled?
It seems to me that if Congress wants to save money than tax whatever the remaining BAH is as income. For example if someone’s BAH is $2,000 and rents a house for $1,500 than tax the extra $500 as earned income. This would keep money in troops pockets and not artificially increase rental rates across an entire community plus put money back in the treasury. This makes too much sense so it probably will not happen.
Apparently a number of on-post housing for US servicemembers in Korea are not up to standard:
An Inspector General’s report has cited hundreds of potentially dangerous housing code violations, ranging from missing sprinkler systems to exposed copper wiring, in U.S. military housing in South Korea, although only 11 were considered serious.
Most of the violations were related to inadequate upkeep of housing facilities, according to the Oct. 28 report, which found that “housing visits and inspections were not being conducted in accordance with established instructions and procedures.”
Twelve percent of the occupied buildings at 13 U.S. Forces Korea military installations — ranging from family housing to barracks and dormitories for unaccompanied servicemembers — were reviewed during the IG’s March 10 to April 24 inspections. The checks found 646 deficiencies in 277 units, mechanical rooms and common areas.
The 11 “critical” deficiencies included an out-of-service fire alarm system at U.S. Army Garrison Yongsan, which left the occupants of one building with no means of fire detection. Furnaces in two other buildings at the Seoul base were leaking heating oil onto an electric blower motor, posing a fire hazard. [Stars & Stripes]
You can read more at the link, but I have lived in quonset huts and crackhouses in Korea before so what servicemembers have to day is much better than just a decade ago. With that said the real concern I have is how come the fire departments are not doing regular inspections of these facilities to ensure they are safe? If they are then why did they not catch these issues beforehand? Why did it take an IG inspection to find these deficiencies?
You would think that Koreans would have learned from the US housing market crash where eased mortgage lending was a major factor in the crisis and not to replicate the same conditions in Korea. However, just like in the US it appears political expediency is more important than sound financial judgment:
South Korea recently relaxed restrictions on mortgage lending to jump-start its housing market. While it’s too early to judge the impact, there have been some initial signs that sales are picking up.
The move has also made some economists nervous about already high household debt levels turning critical. South Korea’s household debt has more than doubled over the last decade to almost $1 trillion. The debt-to-disposable-income ratio in South Korea of over 160% is much higher than that of the U.S., Germany, France and the U.K.
Among those worried about the ever increasing amount of borrowing is South Korean lawmaker Park Won-seok of the opposition Justice Party. Mr. Park recently released data from the Financial Supervisory Service showing how Koreans use money they have borrowed in the form of mortgage loans.
Out of the total 67 trillion won ($63 billion) in mortgage loans made during the first seven months of this year, 32 trillion won, or just under half was used for purposes other than home buying.
According to Mr. Park, the pattern of mortgage loan usage is a concern because eased lending rules will encourage Koreans to take on more borrowing for things like living expenses, business costs and education. That will likely make those living on borrowed money even more vulnerable to falling into a debt trap of borrowing to keep repaying debt in an unsustainable way. [Wall Street Journal]
You can read more at the link, but it is pretty amazing that almost half of the mortgages are not even for home purchases.
