As the government reviews a plan to shift the tax base for the comprehensive real estate tax (jongbuse) from the number of homes owned to the value of assets held (aggregate value), attention is turning to whether the preference for a single "premium home" will ease. The prevailing view is that if taxation on ultra-high-priced homes is strengthened, demand to upgrade to prime districts will be blocked and the upward price trend will be curbed. Analysts say that with the abolition or reduction of the long-term holding special deduction for capital gains tax also under discussion, there is a high possibility of properties being released to the market in the short term, centered on the elderly and retirees. However, concerns are also raised that unless transaction taxes such as acquisition and transfer taxes are lowered to provide an exit, owners may hold out, particularly in the scarce Han River belt, which could deepen a freeze in available listings.
According to related industry sources on the 27th, the government's strengthening of taxation on ultra-high-priced homes is widely expected to raise taxes on "premium homes" centered on Seoul's Gangnam and the Han River belt. Real estate experts predicted that higher holding taxes would, as the government intends, put the brakes on price increases in the three Gangnam districts and the Han River belt. Nam Hyuk-woo, a researcher at Woori Bank's Real Estate Research Institute, forecast that "the ultra-high-priced home market, where taxation is being strengthened, will see fewer transactions amid a wait-and-see stance as buyers watch price trends." Park Won-gap, chief real estate expert at KB Kookmin Bank, also noted, "As the burden of holding homes increases, it will be difficult for purchase demand for ultra-high-priced homes to grow," adding, "Upgrading to prime districts is unlikely to be easy over the next one to two years."
As holding taxes rise, there will be some selling demand from elderly owners and retirees in their 60s and 70s, but the prevailing forecast is that this will not lead to a sharp price drop caused by a rapid release of properties. Ko Jun-seok, a professor at Yonsei University's Sangnam Institute of Management, said, "If holding taxes become a burden, it means selling the home and relocating elsewhere, but it is not easy to give up an area and living environment one has lived in for a long time." He added, "Without an exit, owners have no choice but to hold out, so it is necessary to provide an exit, such as by lowering transaction taxes." Nam said, "Because of the scarcity of ultra-high-priced apartments, if owners judge that 'if I sell this home, I will never be able to buy it again at this price,' they have no choice but to hold out, which could lead to a freeze in listings."
Some observers also say that in a situation where new housing supply is not flowing smoothly, strengthening holding taxes may curb price increases for ultra-high-priced homes, but market instability will persist as purchase demand continues for mid- to lower-tier districts, where prices have risen less, and for high-priced apartments that fall short of the ultra-high-priced home threshold. Professor Ko said, "Demand to purchase homes is steady, but supply is not flowing smoothly due to various regulations," adding, "Redevelopment projects in preferred areas such as city centers and areas near subway stations must be revitalized to disperse demand, which can ease the concentration on premium homes."
