President Lee Jae-myung stated that the current situation of rising real estate prices and low property tax burdens is a "problem that will eventually burst," emphasizing the need for institutional reform even at the cost of political backlash. He suggested that rather than uniformly increasing property taxes, the burden should be differentiated based on factors such as residency status, housing prices, the number of properties owned, and location. He also noted that the existing protections for single-homeowners have contributed to the so-called 'one good house' phenomenon.
During the 'National Forum on Real Estate Policy' held on July 23 in Yeouido, Seoul, President Lee remarked, "To normalize our property tax to a level typical of advanced countries, we would need to raise it at least threefold," but cautioned that such an increase could lead to near-riot conditions. He added, "We must prepare for this, even if it incurs some political costs. It will eventually burst. I do not know which generation will face it, but it will have a tremendous impact on South Korea."
President Lee referenced Japan's long-term real estate stagnation, stating, "Prices kept rising until they reached a breaking point, leading to discussions of 'lost 20 years, lost 30 years.'" He expressed concern that South Korea might be heading toward a similar peak, warning that the rapid increase in housing prices and rising household debt could lead to long-term economic instability.
However, he emphasized that any increase in property taxes should be designed gradually and differentially. He proposed establishing a reasonable tax burden based on typical single-homeownership, while lowering tax burdens for primary residences, affordable housing for low- and middle-income families, and properties in rural areas. Conversely, he indicated that taxes could be increased for high-value homes, multiple properties, and those clearly intended for investment or speculation.
President Lee also diagnosed that the existing tax benefits for single-homeowners have exacerbated the 'one good house' phenomenon. He stated, "By respecting and protecting one household, one home, we have treated all homes equally, regardless of their price, leading to the most efficient investment in a single property for profit."
He further noted, "Without distinguishing between residential and investment or speculative properties, significant issues can arise from small loopholes," emphasizing that the pressure for investment and speculation in the South Korean real estate market is so high that even minor gaps can lead to major problems. He also mentioned that cases where individuals cannot temporarily reside due to work or children's education should not be classified as investment properties.
President Lee highlighted the need for a safety net in light of increased property taxes. He warned that without adjustments to transaction taxes and capital gains tax systems, the effect of increased property taxes on the market could be limited. He suggested that the burden of property taxes could be partially recognized as a cost in the capital gains tax calculation.
Regarding the jeonse loan system, he stated, "It seems time for adjustments." He pointed out that providing nearly unlimited jeonse loans in the name of supporting the public has led to rising housing prices, as excessive guarantees and loans have contributed to the risk of jeonse fraud and increased housing prices.
The government is expected to review the opinions presented at this forum and incorporate some into a tax reform plan as early as the end of this month. Subsequent measures in the supply and financial sectors are also anticipated to be detailed in phases.
* This article has been translated by AI.
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