Analysis of PRMR and LRMR According to Tax Decrease using Registration Information of Apartment

Abstract

The purpose of this study is to analyze the PRMR and LRMR in the real estate market according to tax decrease. After the Lehman Brother`s shock in the US in 2008, the Korean government had temporarily cut real estate taxes. Therefore, the study used the trade data from January 2006 to June 2014 among 360 apartments in Korea.In this study, two hypotheses were established.The first hypothesis is that the PRMR (Profit Real Estate Maximized Potential Rate of Profit) is larger than LRMR (Loss Real Estate Maximized Potential Rate of Loss). The second hypothesis is if the transfer income tax decreases, the difference between PRMR and LRMR declines.
The results of the study revealed that hypothesis 2-1 was rejected in the first and second increase of transfer income tax and the second increase of acquisition tax. However, it was accepted in the third increase of acquisition tax, which was analyzed based on a one-year standard. This can be attributed to the investors’ strain for the increase of tax rate, which should be traded more carefully, thereby decreasing PRMR decrease and increasing LRMR.
It can be concluded that the implementation of other policy ontax increase, except the third acquisition tax increase, led investors’ cognitive bias to decrease what previouslyexisted.

Keywords— acquisition tax, transfer income tax, tax policy, PRMR(Profit Real Estate Maximized Potential Rate of Profit), LRMR(Loss Real Estate Maximized Potential Rate of Loss), MPRP(Maximized Potential Rate of Profit in Real Estate Price Index), Behavioral Tax, apartment market.