The outline of the tax reform plan the government will announce in early August is taking shape. As expected, the core of the plan is to shift the basis for the comprehensive real estate tax from the number of homes owned to property value, thereby strengthening the holding tax burden on multiple-home owners and raising the tax burden on ultra-high-priced homes. There is a strong likelihood that the long-term holding special deduction, cited as a side effect of the "one prime property" phenomenon, will also be reduced for ultra-high-priced homes.
At the property forum chaired by President Lee Jae-myung, many argued that the government should expand "opportunities for homeownership" for genuine end-users rather than suppressing demand and regulating transactions. Yet the government remains focused solely on strengthening the tax burden. This is why critics have called the forum a foregone conclusion. On top of this, National Tax Service Commissioner Lim Kwang-hyun criticized the long-term holding special deduction for ultra-high-priced homes as "the ultimate in regressiveness." Given this, it is no wonder that complaints have emerged that "the government drove up home prices, and now it is calling them ultra-high-priced homes and telling people to pay more taxes."
President Lee's approval rating has fallen for two consecutive weeks, also due to dissatisfaction with property policy. In a survey conducted by pollster Realmeter from the 20th to the 23rd of this month, positive assessments of President Lee's handling of state affairs stood at 46.3%, down 2.1 percentage points from the previous week. The president personally chaired the property forum, pledging to listen to public sentiment, but his approval rating fell rather than recovered. The abolition of supplementary investigation authority and the stock market plunge triggered by leveraged exchange-traded funds (ETFs) also weighed as negative factors, but market anxiety over the push to strengthen property taxes and the erosion of public sentiment had a considerable impact.
Normalizing the property market cannot be achieved through taxes alone. In that regard, it is meaningful that Prime Minister Han Seong-sook stated at a follow-up forum on the 27th that "we will listen to the diverse concerns of each and every citizen regarding real estate." Kim Yong-beom, head of the Presidential Office Policy Office, also said in a radio interview that day that even if the holding tax is strengthened, an exit route would be opened so that multiple-home owners can put their properties up for sale. Ha Joon-kyung, senior secretary for economic growth, went so far as to mention "loans that stimulate supply rather than demand." However, what is urgently needed is not stopgap measures conscious of worsening public sentiment, but the fundamental policy shift the market expects. The government must move quickly on practical and rapid supply expansion, financial support for genuine end-users, and rational improvement of regulations that block transactions. Ultimately, what moves the market is not tax rates but trust in policy. When the government restores market trust through predictable policy, it will be able to both curb home prices and recover its faltering approval rating.
