With Seoul apartment prices continuing to rise and the difficulty of securing rental housing rapidly intensifying, the Presidential Office has reaffirmed its policy of strengthening property holding taxes and capital gains taxes. Kim Yong-beom, the Presidential Office's policy chief, said on social media Saturday that "real estate taxation must be normalized," adding that "reasonably adjusting holding taxes and capital gains taxes is necessary and the right direction." Stressing the high likelihood that gains from the semiconductor boom will expand market liquidity among households and businesses and that this money will eventually flow into the real estate market, he also argued that "ordinary regulations may not be enough."
President Lee Jae-myung and the Presidential Office have already stated their policy of adjusting property holding and capital gains taxes on numerous occasions. At his recent press conference marking one year in office, President Lee said, "Our country's holding taxes are generally low," and that "it would be right to impose holding burdens comparable to those in advanced Western countries." Accordingly, the Ministry of Economy and Finance appears likely to strengthen taxation on multiple-home owners and owners of ultra-high-priced homes in its tax reform plan to be announced in late July. A reduction of the special long-term holding deduction for non-resident single-home owners is considered probable, while raising the fair market value ratio—the tax base for property and comprehensive real estate taxes—and even increasing the holding tax rate are being discussed.
The problem is that the current real estate market is not easy enough to control through regulation alone. In particular, the upward trend in jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent) and monthly rent prices is troubling. According to the Korea Real Estate Board, the jeonse supply-demand index for Seoul apartments stood at 122.5, the highest in five years and six months, while the monthly rent supply-demand index also rose to 114.8. Yet apartment move-in supply for the second half of this year and next year amounts to only 12,300 units and 17,197 units, respectively. These levels fall far short of the annual average of about 40,000 units from 2020 to 2024, raising concerns over rising apartment prices and worsening rental difficulties caused by supply shortages.
Resolving rental difficulties and stabilizing housing prices for ordinary citizens' housing stability must be addressed through supply, not through strengthening holding and capital gains taxes. It has already been proven that the real estate market cannot be stabilized through artificial demand suppression. This is evident from the fact that home prices continued to rise despite the strong demand-suppression measures the government implemented, including the full expansion of land transaction permit zones, mortgage lending restrictions, and the termination of the moratorium on heavy capital gains taxes for multiple-home owners. Now is the time to boldly and swiftly implement effective supply-expansion policies—such as easing regulations on reconstruction and redevelopment and streamlining maintenance planning procedures—so that the private sector can supply sufficient quality housing.
