Oh Se-hoon, the Mayor of Seoul, sharply criticized the real estate tax reform plan proposed by the Lee Jae-myung administration, calling it a "tax hell policy" where taxes increase whether one buys or sells a home.
He argued that the government's reliance on tax increases instead of expanding supply distorts the market, ultimately harming low-income citizens and young people the most.
On August 4, Oh stated on his social media, "The government talks about expanding supply, but there are no practical measures to increase supply in this plan. Simply raising taxes will not stabilize housing prices; it will only make the market more unstable."
He identified the strengthening of long-term holding tax exemption requirements as a key aspect of the reform. Under the new rules, merely holding a property for a long time will not qualify for tax benefits; actual residency in the property will be required to receive exemptions. He criticized this as effectively sending a message to the market that "if you do not reside in the property, you will pay more capital gains tax."
Oh also expressed skepticism about the government's expected market effects. While the government anticipates that increasing tax burdens will lead to more properties being listed for sale, he noted that in reality, many owners may choose to hold onto their properties despite the tax increases, resulting in only a few urgent sales.
He asserted, "If there are not enough properties on the market, the effect of stabilizing housing prices will inevitably be limited."
Oh raised concerns that middle-class and low-income families would suffer the most. He warned that if homeowners seek to reduce their capital gains tax burden by evicting tenants to live in their properties, it could lead to a decrease in rental supply and an increase in rental prices.
He pointed out, "Ultimately, the victims will not be the multiple homeowners but the young people and low-income families who need to secure rental housing."
He also highlighted the complexity of the new system as a problem. For single homeowners living in different regions due to work or livelihood, it is unclear what criteria will be used to recognize their residency, and what exceptions will be allowed, which could confuse not only the public but also tax professionals.
Oh noted that the market has already begun to identify loopholes in the policy. "The government claims it is targeting high-priced homes, but in reality, there is a movement in the market to seek out relatively lower-priced properties, known as 'less desirable single units.' The market is looking for new tax-saving methods rather than following the path laid out by the policy," he said.
He emphasized, "The most certain way to stabilize the real estate market is not through taxes but through supply. The public must have confidence that housing will continue to be supplied steadily for the market to stabilize."
He continued, "Expanding supply through redevelopment and reconstruction is the fundamental solution. We must shift away from trying to manipulate the market through taxes and move towards a supply-centered real estate policy."
The debate surrounding the government's tax reform continues, with questions about whether a policy that raises tax burdens without expanding supply can stabilize the market. Major economic and real estate publications have consistently pointed out that merely strengthening capital gains and holding taxes could lead to a repeat of transaction stagnation and inventory lock-up. Meanwhile, the government and ruling party maintain that these measures are necessary to establish a market order focused on actual demand and curb speculative demand.
As a result, the discussion over the effectiveness of this tax reform is expected to continue for the foreseeable future.
* This article has been translated by AI.
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