SEOUL, August 04 (AJP) - Gangnam's luxury apartment owners were left scrambling over whether to sell, move back into their homes or brace for sharply higher tax bills after the government unveiled a sweeping property tax overhaul that many residents described as bombshell.
Within hours of Monday's announcement, real estate agents across Seoul's most expensive neighborhoods said phones began ringing from owners asking whether they should accelerate planned sales or abandon rental arrangements to qualify for more favorable tax treatment before the new rules take effect.
The overhaul, unveiled as part of President Lee Jae Myung's 2026 tax revision package, seeks to shift the burden toward owners of ultra-expensive and non-owner-occupied homes while easing taxes for many owner-occupiers.
"When you add everything together, wage income is taxed at as much as 49.5 percent. But even if someone earns capital gains of 10 billion won from real estate, they pay only a few hundred million won in tax," Lee said during a cabinet meeting on Tuesday, following the tax revision announcement on the previous day.
The president argued that the tax code should better reflect taxpayers' actual ability to pay rather than continue giving preferential treatment to large gains from property.
The announcement immediately exposed one of the country's deepest political and economic fault lines.
Few issues influence household finances — or election outcomes — more than housing in Korea, where homes function not only as places to live but also as retirement savings, investment vehicles and symbols of social mobility.
Physical assets account for nearly three-quarters of average household wealth, while Seoul apartment prices have climbed for 13 consecutive months, widening the divide between homeowners and aspiring buyers.
The proposal reorganizes the comprehensive real estate holding tax around both property value and actual residency instead of simply counting how many homes a person owns.
The tax exemption for a single owner-occupied home would rise from an officially assessed value of 1.2 billion won ($838,000) to 1.4 billion won, equivalent to roughly a 2 billion won market value.
Taxes would generally decline for owner-occupiers with homes worth up to around 3 billion won, while owners of properties valued above roughly 4 billion to 5 billion won, multiple-home owners and nonresident owners would face heavier burdens.
The government also plans to fundamentally overhaul capital gains tax deductions.
Beginning in 2029, tax benefits for long-held homes will depend almost entirely on how long owners actually lived in the property, replacing decades of preferential treatment based largely on ownership period. The maximum deduction will also be capped at 1 billion won.
Supporters say the distinction between a primary residence and an investment property is long overdue.
"The direction is exactly right," said a 55-year-old manager at a midsized paper company in Seoul.
"Housing should be a place to live, not an object of speculation."
He said the package would reduce reasonable burdens on ordinary homeowners while asking owners of luxury and investment properties to contribute more.
"It moves away from the outdated approach of looking only at how many homes somebody owns and toward a system that considers their actual ability to pay."
A public corporation manager in his 40s living in Goyang also welcomed the proposal despite saying taxes on ultra-expensive homes felt distant from most people's lives.
Democratic Party lawmakers echoed that view.
Rep. Jin Seong-jun described the overhaul as an important step toward improving tax fairness, dismissing opposition claims of a "tax bomb" as familiar political rhetoric.
Rep. Kim Nam-joon likewise called the proposal evidence of the administration's commitment to fair taxation.
Jin nevertheless acknowledged taxation alone would not solve Seoul's housing problem."Ultimately, stabilizing housing prices requires large-scale supply measures," he said, noting that the government is expected to unveil additional housing supply policies soon.
The strongest backlash came from Seoul's affluent southern districts, where many apartment owners purchased homes decades ago before redevelopment transformed them into some of Asia's most valuable residential properties.
In Daechi-dong, home to luxury complexes such as Raemian Daechi Palace, agents said homeowners who had casually discussed selling earlier this year suddenly became far more serious after the announcement.
"People who had been wondering whether to sell this year are now seriously considering it," one broker said.
"Those already planning to sell are likely to move up their timetable, while others are deciding they may have to move back into their homes."
Another Daechi agent said inquiries from prospective sellers began arriving almost immediately after the government released the proposal. Some landlords whose leases expire this year are now considering returning to live in their apartments themselves.
Across west, Banpo in Seocheo, owners were asking not about selling but about residency requirements.
"People who rented out their homes are asking whether moving back in would change how much comprehensive property tax they pay," one Banpo broker said.
"They're trying to understand exactly when residency matters and how the new rules will apply."
Among homeowners, the biggest anxiety centered on the proposed overhaul of capital gains taxes.
A cardiothoracic surgeon in his 50s living in Banpo Xi said the scale of the changes had caught even experienced property owners by surprise.
"The biggest shock is the capital gains tax," he said.
"I recently looked at apartments in Apgujeong, and between one-third and nearly half were owned by people approaching 80."
Many purchased their homes 30 or 40 years ago for less than 1 billion won, he said. Today, some are worth around 11 billion won.
"For those people, the shock will be enormous," he said.
"If they don't sell within the next year or two, some could end up paying an additional 1 billion to 2 billion won in taxes."
He also estimated annual holding taxes on large apartments in Banpo or Apgujeong could reach 50 million to 60 million won — comparable to the after-tax annual income of many salaried workers.
Not everyone opposed the overhaul on financial grounds alone.
A lawyer in his 60s living in Yongsan called the proposal "a communist policy," arguing that higher taxes would discourage homeownership and restrict people's freedom to move.
Others worried about unintended consequences for renters.
A woman in her 20s working for a major corporation questioned why the government appeared to be discouraging multiple-home owners who provide rental housing.
"Is this a signal that the government ultimately wants to eliminate the jeonse system?" she asked.
"At a time when jeonse and monthly rents are already rising, discouraging multiple-home owners or owners of one nonresident property may not benefit ordinary citizens."
Conservative People Power Party lawmaker Ahn Sang-hoon argued that landlords would eventually pass higher taxes on to tenants while housing demand would simply spill into neighboring districts, pushing prices higher elsewhere.
The government has attempted to soften the transition by temporarily easing capital gains taxes on multiple-home owners through 2028 to encourage property sales.
Opponents, however, argue that raising ownership costs while maintaining transaction-related burdens risks discouraging private rental supply instead.
The debate therefore extends well beyond taxation.
Supporters see the overhaul as a long-overdue effort to restore fairness by treating housing primarily as shelter rather than a vehicle for tax-advantaged wealth accumulation.
Critics counter that it punishes long-term homeowners whose neighborhoods appreciated around them, could reduce rental supply and ultimately shift higher costs onto tenants.
Whether the reforms cool Seoul's overheated housing market may depend less on tax policy itself than on whether the Lee administration can deliver enough new housing to ease the chronic shortage that has fueled soaring prices for years.
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