Concerns have been raised that the government's proposed real estate tax reform may lead to instability in the rental market and a decrease in housing supply, rather than stabilizing home prices. Experts pointed out a lack of consistency between strengthening property taxes and easing transaction taxes, as well as insufficient consideration for rental households, which could result in unintended side effects.
On August 6, the city of Seoul held a public forum on real estate normalization at the Seoul City Hall, chaired by Mayor Oh Se-hoon. Experts, including Yoon Ji-hae, head of the Real Estate 114 Research Lab, and Lee Chang-moo, a professor of urban engineering at Hanyang University, expressed concerns about the side effects of the government's tax reform plan and emphasized the need for policy adjustments and increased supply.
Professor Lee noted that while the tax reform targets the high-end apartment sales market, it could ultimately have negative effects on the rental market. He pointed out that since the launch of the Lee Jae-myung administration's 'one good house' policy and other restrictive measures, changes have begun to appear in the rental markets of relatively stable areas like Nowon, Dobong, and Gangbuk, collectively known as 'Nodogang.' He stated, 'Unexpected results are occurring.'
He further remarked, 'The government has proposed a policy direction of moving from ownership to residency, but there is a lack of consideration for rental households. Given that Seoul has a high proportion of rental households, if there is insufficient support for them, a social issue may arise where only those with financial means remain in the city.'
Professor Lee emphasized the importance of managing high-end housing prices but stressed the need for policy designs that consider the diverse characteristics of market participants, particularly the significant number of non-resident homeowners in Seoul.
Yoon also pointed out that the tax reform plan contains elements of policy conflict. He noted that while the government identifies the 'one good house' phenomenon as a cause of rising home prices, the actual tax reform is designed to strengthen the one-household, one-home policy, which could be interpreted as reinforcing rather than alleviating the 'one good house' approach. He acknowledged agreement with the direction of managing the market based on asset value rather than the number of homes but highlighted inconsistencies with the principle that if property taxes are strengthened, transaction taxes should be lowered. He identified the simultaneous strengthening of property taxes on high-end homes and partial easing of capital gains taxes as a point of policy conflict. He added that since the acquisition tax has not yet been finalized, further discussion is needed during the reform process.
Yoon also emphasized the necessity of increasing supply. He explained that since 2017, the growth rate of households in Seoul has outpaced housing supply, with approximately 370,000 new households formed over the past eight years, compared to only about 270,000 new housing units. He suggested mobilizing all available means, including redevelopment, reconstruction, land development, and utilizing idle land, to increase supply, and proposed considering ways to disperse the concentrated housing demand in Seoul to the Gyeonggi and Incheon areas.
The forum was attended by over 50 participants, including experts such as No Hee-cheon, a professor of accounting at Soongsil University, Choi Won-kyu, a tax accountant, and Jeong Jae-hoon, a professor of urban planning and real estate at Dankook University, as well as young people without homes, non-resident homeowners, private rental business operators, and real estate agents, who discussed the tax reform, rental market, and housing supply strategies for about 100 minutes.
* This article has been translated by AI.
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