Finance Minister and Deputy Prime Minister Ku Yun-cheol announced plans to unveil a reform proposal for the real estate tax system by the end of July. He indicated that both holding taxes and transaction taxes would be examined. This approach is appropriate, as the current real estate market cannot be stabilized with piecemeal solutions. Despite tightening loans, discussing supply, and increasing regulations, housing prices in key areas of Seoul and the surrounding metropolitan region remain stubbornly high. In fact, some areas continue to see record-high transactions, exacerbating market anxiety.
Since the new government took office, various real estate measures have been introduced. However, the market has not responded as the government intended. Genuine homebuyers have become more anxious, while multiple homeowners and investors have exploited loopholes in the policies. Although regulations have increased, prices have risen, and while the tax burden has grown, speculative sentiment has not been sufficiently curbed. This is the dilemma facing current real estate policy.
The real estate tax system is not merely about increasing tax revenue. It should not penalize homeowners indiscriminately, nor should it freeze the market by hindering transactions. The key is the direction of the tax. If excessive burdens are placed on genuine single-homeowners while failing to address speculative demand seeking short-term profits, the policy will fail. Conversely, if holding burdens are increased while maintaining high transaction taxes, inventory will be locked up, further distorting the market.
Therefore, both holding taxes and transaction taxes must be adjusted together. Relief measures should be established for long-term single-homeowners and those with limited income, while clear tax burdens should be imposed on those holding multiple high-value properties or seeking short-term gains. Transaction taxes should be lowered to allow sellers to enter the market, while a reasonable holding cost structure should be established for those expecting capital gains merely from holding properties.
In particular, the tax system for multiple homeowners needs to be more refined. Treating all multiple homeowners as speculative forces will only provoke backlash from the market. Long-term holders who contribute to rental supply should be distinguished from those seeking short-term profits. The tax system must reflect this difference. Depending on whether the goal is to encourage properties to be listed on the market, maintain rental supply, or curb speculative holding, the tax rates, deductions, and exemptions should vary.
The capital gains tax follows the same principle. Excessively high capital gains taxes can lock up inventory. If taxes are raised to control housing prices, a paradox may arise where reduced inventory leads to further price increases. Therefore, it is necessary to provide temporary incentives for sales over a certain period, followed by increased burdens on speculative holdings. A tax system that does not open up avenues for market movement will ultimately make the market more rigid.
The objectives of real estate taxation must be clear. Homes should be places to live, not speculative instruments for generating windfall profits. However, realizing this principle requires careful design rather than mere slogans. Genuine demand must be protected, speculative demand must be blocked, and inventory must be made available in the market. This is why holding taxes, transaction taxes, capital gains taxes, and deduction systems need to be designed as a cohesive package.
The real estate market is driven by sentiment. If the government sends unclear signals, the market will respond immediately. The fear of a tax bomb is problematic, but the expectation that policies will ultimately fizzle out is also concerning. The government must present clear principles and detailed criteria in the tax reform at the end of July. Real estate taxation should be strong but not harsh. It must be precise to endure over time.
Controlling housing prices is not a one-time solution. Supply, finance, taxation, and regional balance policies must work in tandem. Among these, taxation is a key tool for changing market expectations. If this reform becomes just another temporary measure, the market will no longer fear the government. What is needed now is not a showy tax increase, but a precise tax reform that changes market behavior.
* This article has been translated by AI.
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