According to the Ministry of Finance, the government is currently reviewing a tax reform bill set to be announced next month. This reform is interpreted as an effort to lower expected profits from real estate holdings and create a market environment focused on actual demand.
One of the most significant changes in this tax reform is the long-term capital gains tax exemption. Under the current system, property owners who hold real estate for a certain period benefit from tax deductions on capital gains. The government has identified that this structure has led to unintended consequences, such as encouraging long-term asset retention without actual residency, often through gap investments.
Market analysts predict that if the long-term exemption shifts to focus on actual residency, the tax burden will increase for multiple property owners and those holding assets for investment purposes.
The tax system for agricultural land is also under review. Currently, there are tax reductions for capital gains on farmland that meets specific criteria. However, the reform proposal aims to scrutinize the actual farming activities more closely.
There are expectations that land taxation will be strengthened, particularly for non-business land and investment-type assets, including rural forest land.
Revisions to property taxes are another major concern. Discussions are underway regarding increasing the tax burden through adjustments to the fair market value ratio. In the past, property price levels were the focal point of tax discussions, but future emphasis is expected to shift toward limiting unearned income and expected returns from real estate.
Ultimately, tax benefits are likely to be differentiated based on actual residency and use rather than the duration of ownership. While the strategy of holding onto a single valuable property for an extended period was previously effective, actual residency is expected to become a significant factor moving forward.
The proposed changes to the long-term exemption and the tightening of taxes on non-business land are likely to impose additional burdens on asset holders. The increased tax burden may discourage holding properties that are not intended for actual residence or use. Consequently, there is speculation that non-residential properties and idle land may enter the market around the time of the tax reform announcement.
Some experts warn that the increased tax burden resulting from the reform could lead to adverse effects, such as rent hikes and tax resistance, indicating a need for protective measures.
Lee Eun-hyung, a researcher at the Korea Construction Policy Institute, stated, "Considering the significant impact of the previous presidential campaign's focus on construction and real estate issues, it is concerning that current measures emphasize demand suppression rather than housing supply. We need to think about how to address both supply expansion and demand suppression together."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.