The real estate market is difficult to navigate, and so are government policies.
‘Only once in a lifetime.’ A proposal to limit the capital gains tax exemption for one household to a single instance emerged during a real estate debate. The concern is whether it is fair to continue enjoying tax benefits while profiting from each home sale. President Lee Jae-myung also expressed interest, suggesting that unlimited tax exemptions may pose issues.At first glance, this seems equitable. However, the idea of having only one tax exemption card for a lifetime means it is rational to save it until the largest profit opportunity arises. Those with smaller profits may hesitate to use the card, while those who could afford expensive homes may benefit significantly when they realize substantial gains. This paradox means that a system designed for fairness may inadvertently favor the wealthy. In the United States, capital gains tax exemptions are not limited to a single instance but can be applied repeatedly within certain limits.
Kim Yoon-deok, Minister of Land, Infrastructure and Transport, expressed a desire to build homes even if it means releasing greenbelt land. However, the third new town project, which includes a significant amount of land released from greenbelt restrictions, has not seen timely construction. Despite being announced 7 to 8 years ago, delays in compensation, permits, construction costs, and financing have stalled groundbreaking and occupancy. If the bottleneck lies not in land but in the construction process, opening new land may not resolve the issue.
The same applies to finance. The proposal to eliminate the stress debt service ratio (DSR) for local areas is valid in the context of addressing overheating in metropolitan areas and stagnation in rural regions. However, the stress interest rate margin applied in rural areas is already only a quarter of that in metropolitan areas. Removing safety measures that assess repayment ability could shift the issue of unsold properties to local household debt.
Ideas must face counterarguments to become effective policies.
That said, these proposals are not without merit. Ideas are inherently rough and can reveal contradictions in established systems, pushing discussions forward. The significance lies in prompting reevaluation of the scope of tax exemptions, the necessity for new land, and the appropriateness of regional financial regulations.
All three proposals clearly identify issues. However, to transform these concerns into solutions, they must undergo scrutiny and validation. It is essential to calculate who benefits and who bears the costs, as well as the potential reactions when these policies intersect with others. The moment a president or minister responds to a bright idea, the narrative shifts.
Such calculations should already be complete. The two debates chaired by the president and the prime minister lasted nearly six hours. Prior discussions on supply, finance, and tax policy also took place, and as of July 27, 7,153 opinions had been submitted online.
The government has gathered enough input to determine a direction. Conflicting options regarding property taxes, transaction taxes, loan regulations, protection for genuine buyers, and revitalization of redevelopment projects have all been presented. Now, the government must reveal its choices to the public.
There is ample diagnosis and ideas; now the government must provide solutions.
What the public seeks is not another diagnosis of why housing prices have risen. The explanations of supply shortages, capital flowing into real estate, and gaps in loans and tax systems are not new. What is needed is the government’s response regarding how to adjust property taxes, whether to lower transaction taxes simultaneously, how to tighten regulations on jeonse loans, and what steps to take first in terms of supply.
Analysis and deliberation by experts and policymakers should have progressed further. They should have confirmed the assumptions and legal and practical feasibility of each proposal, considering the impacts on tax revenue, finances, housing prices, rental prices, transaction volumes, and construction and occupancy rates across various scenarios. The role of experts is to highlight the benefits, costs, and risks of each option, providing a basis for government decision-making. It is the government’s responsibility to choose priorities and determine which side effects to accept based on that foundation.
As the government prepares to announce tax reforms and a comprehensive real estate policy, what is needed now is not to expand options further but to explain what has been chosen and why.
The public is not waiting for a list of individual measures. If property taxes are increased, how will the issues of locked inventory and tenant burden be addressed? If jeonse loans are tightened, how will the burden on tenants and the decrease in non-apartment supply be mitigated? If redevelopment projects are expedited, where will the demand for pre-leases and monthly rents during the transition and demolition periods be absorbed? The combination and execution order of tax, finance, and supply that answers these questions constitute the solution.
Supply must also show not only the quantity but also the order and timeline for deploying administrative power and support for existing public land and new land, as highlighted in the presentation on July 27, which suggested prioritizing the integration of finance, tax, and permits.
The interests of renters seeking stable housing costs, homeowners worried about declining asset values, landlords receiving rent, and tenants wanting lower housing costs are inherently different.
This is why the government exists. President Lee Jae-myung stated in the first debate that after confirming facts and reconciling interests, if gaps remain, it is the authority of public officials to reach a final conclusion. He also mentioned that accepting the resulting dissatisfaction and criticism is part of their responsibility.
Prime Minister Han Seung-soo also noted that while individual cases must be examined carefully, standards must inevitably be established. Determining the criteria for one-homeowners and high-value residential properties is the responsibility of public officials.
Conclusions are not answers but coordinates for policy.
This does not mean that all tax rates, loan limits, and supply quantities must be finalized at once. It means that the government must define what policy goals to pursue and the principles and order in which to act. Even if it is not a perfect answer, the government must provide coordinates that allow the public to judge and for the market and various departments to operate.
What is needed is not a promise to reduce housing prices by a certain percentage. The public needs to know the direction of taxes, the extent of loan regulations, and what will be initiated and when in terms of supply to make decisions about selling, buying, applying for housing, or moving. During the second debate, concerns were raised that if only the possibility of increasing property taxes was mentioned without clarity on transaction tax direction, anxiety would grow, and a clear direction was requested.
While the government’s clarification of direction may not immediately eliminate price instability, it can reduce the uncertainty that leads to speculation about the direction of tax, loan, and supply policies. Establishing a clear direction will also minimize the discord that arises when tax, finance, and supply measures undermine each other.
Further discussions and on-site communication are necessary. However, the government should not come to the table empty-handed. It must first disclose the plans and the rationale behind its choices, and validate the anticipated impacts and execution errors. If a significant direction has already been set, the government must explain the basis for its choices. If the fundamental direction has not been established even before the announcement, the policy-making process must be reevaluated.
With the two major debates concluded and the announcement of tax reforms and a comprehensive real estate policy imminent, the public has heard enough diagnoses and potential ideas. Now, the government must answer what solutions it will adopt and where it intends to go. What the public is waiting for is not an extension of discussions but solutions and conclusions that allow them to plan their lives again. It is time to put down the microphone and provide answers.
* This article has been translated by AI.
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