Stimulus Package Raises Doubts
The government will cut acquisition tax on homes by 50 percent, and if they are newly built buyers will pay zero acquisition tax for the next five years.
Korea's housing market had its worst month since the 2008 financial crisis in August, with prices falling for a second straight month.
So could these tax cuts kickstart the domestic housing market[Interview : Kim Kyu-jung, Executive Director
Real Estate 114 Research Center] "This will help those trying to purchase homes because of higher rent prices, as well as those wanting to buy homes because they are facing limited options in the houses that are open for rent."
But homebuyers will only be able to enjoy the benefits of the tax breaks for two months after the bill passes … raising questions on how effective the measures will be in boosting consumer spending.
[Interview : Ham Young-jin, Director
Real Estate Serve] "Those looking to purchase homes will be able to enjoy the benefits of tax cuts in November and December only. Those months are off season so there will be limitations on how much the tax cuts will increase the number of home purchases."
Along with home acquisition tax cuts, the stimulus package included a consumption tax cut of 1.5 percent on automobiles.
The Korean automobile market has also been hit hard by the global financial crisis with domestic sales dropping by a staggering 25-percent last month compared to a year earlier.
[Interview : Kim Yong-tae, Manager
Korea Automobile Manufacturers Association] "Since such consumption tax cuts on cars have proven to be very successful in the past, it will be a good incentive for those looking to buy a car."
But critics say these auto tax cuts face the same problem of only being enforced for several weeks.
Compared to the usual tax cut period of six months, this will only be in effect for two months and twenty days.
The stimulus package came at a much needed time, according to economists but critics are casting doubt on how successful the measures will be in boosting the Korean economy.
Yoo Li-an, Arirang News.
Reporter : Lian.email@example.com