As the national forum on real estate, chaired by President Lee Jae-myung, approaches, a battle over the direction of real estate policy is intensifying. Discussions within the government and the real estate sector are focusing on potential reforms to property and capital gains taxes for high-value, multiple, and non-residential properties, while the Seoul city government emphasizes the need for increased supply and rental stability.
According to government and real estate industry sources on July 12, the government plans to hold public discussions on supply, finance, and tax policy from July 14 to 16, followed by a national forum on real estate on July 23, which President Lee will attend. The government aims to discuss various opinions presented thus far and explore future directions for real estate policy.
This forum is seen as more than just a platform for gathering opinions; it is viewed as a gauge for the direction of real estate measures in the second half of the year. Following the loan regulations introduced on June 27, the buying momentum has somewhat stabilized, but concerns over housing prices and rental markets in Seoul remain. The market is keenly interested in whether additional measures will focus on tax increases or on enhancing supply and stabilizing rentals.
The most sensitive issue is taxation. Key discussions are expected to revolve around how to set the property tax threshold for high-value single-home owners, whether to differentiate between taxes for primary residences and non-residential or multiple properties, and whether to reduce capital gains tax benefits for non-residential properties. In particular, the potential reform of the long-term holding tax exemption and adjustments to tax benefits for registered rental businesses are drawing significant attention.
The rationale for advocating tax increases is to curb speculative demand. By raising the tax burden on high-value and multiple property holdings, the government aims to increase the holding costs, thereby encouraging more listings and reducing investment demand that lacks genuine residential intent. There is also a belief that merely tightening loan regulations will not be sufficient to dampen market expectations amid ongoing price increases.
However, simultaneously increasing property and transaction taxes could lead to significant side effects. While raising property taxes may exert selling pressure, if capital gains taxes also rise, homeowners might withdraw listings, leading to a phenomenon known as 'inventory lock-up.' A decrease in transactions could weaken the market's price discovery function and reduce options for genuine buyers.
The Seoul city government is emphasizing supply and rental stability over taxation. Mayor Oh Se-hoon welcomed the national forum but stated that the core agenda should focus on expanding supply and stabilizing the rental market, addressing the simultaneous rise in housing prices and rents.
The emphasis on supply stems from the instability in housing supply in Seoul. With limited new land available, redevelopment and reconstruction projects are crucial for increasing supply. However, rising construction costs, burdens from association fees, delays in permits, and increased financing costs are slowing down these projects. There are concerns that merely tightening tax and loan regulations could further weaken the momentum for these redevelopment efforts.
The rental market is also likely to emerge as a key agenda item in this forum. The combination of reduced new housing supply, demand from relocation due to redevelopment projects, and a trend toward renting is increasing instability in the rental market. Even if buying demand is suppressed, a lack of supply in the rental market makes it difficult to alleviate tenants' housing cost burdens. This is why there is a growing call to address rental market stability as a separate agenda.
An industry insider noted, “It is challenging to address both housing prices and rental instability through loan regulations alone. If the forum focuses solely on tax increases, we may see repeated concerns over inventory lock-up and transaction declines, making it necessary to take a comprehensive approach that considers supply, taxation, and rental measures.”
* This article has been translated by AI.
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