Can second-home policy reverse rural population decline?
A newly introduced housing plan to encourage owners of a single home to buy an additional home in rural areas is drawing mixed responses over whether the plan can successfully tackle demographic crises in rural communities as intended.
Addressed in the government’s 2024 economic policy directions announced on Thursday, the plan aims to significantly reduce the tax burden for homeowners in Seoul, Incheon and some parts of Gyeonggi Province when they purchase a second home in any of 89 selected regions across the country.
The plan marks a turnaround after multiple homeowners have been levied with heavy taxes in the name of stabilizing the property market, especially in the greater Seoul area where housing demand is high.
“Simply put, such two-home owners will be virtually regraded as a single homeowner and will receive corresponding tax benefits even after owning an extra home in regions other than the greater Seoul area,” a Ministry of Economy and Finance official said.
Experts assessed that the plan is on the right track concerning its purpose.
They noted that, while Korea as a whole struggles with the world’s lowest fertility rate and rapidly aging society, the demographic crisis has been especially serious in rural areas where young people are leaving in pursuance of better-paying jobs and higher quality of life.
In particular, the risk of depopulation is “extremely severe,” in the 89 aforementioned regions, according to the finance ministry. It did not disclose the names or other further details concerning the 89.
“The government came up with the plan in a timely manner considering farming and fishing villages are literally disappearing,” said Kim Je-kyung, a chief consultant at real estate agency Tumi.
He sided with the government that the plan could possibly “prompt homeowners from the greater Seoul area to get a summer house in those rural regions, spend time there more often and contribute to revitalization of the regional economy.”
Kim, nevertheless, reckoned the plan offers “limited benefits” and that it may not succeed in inducing homebuyers if the benefits are not widened to a satisfactory level.
“For instance, I am not sure why the government did not include acquisition tax as a set of benefits,” he said.
The property tax, comprehensive real estate holding tax and capital gains tax were addressed by the government on the list of benefits but not acquisition tax. He warned that only popular tourist destinations, including those in Gangwon Province and Jeju Island, can benefit from the plan. “It should be devised more carefully to equally contribute to a balanced regional economy,” he said.
Kwon Dae-jung, a real estate professor at Sogang University, voiced a similar view, although he said his view of the housing plan was “generally positive.”
He pointed out that the plan should be specific in addressing the size of administrative districts and prioritize saving villages and towns, over some major cities that also face risk of depopulation but are more capable of withstanding the risks than smaller peers.
“People otherwise will exploit the plan and get a second home in major cities for purposes of speculation,” Kwon said.