Restrictions on 1.3 million multiple-home owners in the greater Seoul area are expected to be further tightened. That is because punitive policies for multiple-home owners were effectively signaled after President Lee Jae-myung said, "Why should we cut taxes for people who do not even live there and hold (dwellings) for a long time for speculation or investment? It seems strange." The market expects the government to roll out policies that can pressure multiple-home owners from acquisition to holding and transfer, prompting them to put their dwellings on the market. For now, the grace period for heavier capital gains taxes on multiple-home owners ends on May 9, and the possibility that the special long-term holding deduction could be revised is not being ruled out.
According to the government on the 22nd, the president said at a New Year's press conference the previous day, "For now, we are not seriously considering using the tax code to drive real estate policy," but added, "If the situation crosses the line and becomes a social problem, we should of course mobilize tax measures." He went on to say, "A home is close to an essential public good, and it is not desirable to make it a tool for speculation," emphasizing, "Some people own five homes for residential use. That should not happen, and residential use should be limited to one."
As the government cements the formula of "multiple-home owner = speculator," the market expects tougher restrictions on multiple-home owners. There is already rising speculation that the grace period for heavier capital gains taxes on multiple-home owners will end on May 9.
The Moon Jae-in administration in 2021 designed a structure to impose heavier capital gains taxes on multiple-home owners to regulate them. The current basic capital gains tax rates range from 6% to 45% depending on the taxable base, and for multiple-home owners, surcharges are added to the basic rates. In designated adjustment areas, an additional 20 percentage points are added for owners of two homes and 30 percentage points for those with three or more. When the 10% local income tax is applied on top, the maximum effective rate for owners of three homes rises to 82.5%. The Yoon Suk-yeol administration has annually extended the grace period for the surcharge on capital gains tax through enforcement decree revisions since May 2022, but the grace period ends on May 9.
The government has not decided whether to end or extend the grace period on the capital gains surcharge. While drawing a line by saying it is "under review," the president's latest remarks have increased the likelihood that the grace period will end. However, with local elections in June approaching, there are expectations that the surcharge grace period could be extended once and revisited next year. There is also talk that the surcharge rates could be adjusted, given that a sudden imposition could have a large impact.
If the grace period ends, about 1.3 million multiple-home owners in the greater Seoul area are expected to be affected. According to the Ministry of Data and Statistics (MODS), the number of households owning two or more dwellings in the greater Seoul area excluding Incheon (as of 2024) is 1.28 million.
The market is also discussing a reduction of the special long-term holding deduction. The special deduction reduces the tax burden by deducting capital gains on long-held real estate according to the holding period. However, simply ending the grace period for the capital gains surcharge would be enough to exclude multiple-home owners in designated adjustment areas from the special deduction, so it is unlikely that this system will be put on the operating table immediately. Tougher property holding taxes on multiple-home owners are also expected by the market.
Through these measures, the government aims to have multiple-home owners put properties on the market, increasing supply and stabilizing the market. But experts said listings could be limited. If signals that home prices are stabilizing do not accompany a sharp increase in tax burdens on multiple-home owners, a lockup of listings could occur instead. Some also noted that tighter regulations on multiple-home owners could lead to a decrease in the supply of jeonse and monthly rental properties.
Ham Young-jin, head of Woori Bank's Real Estate Research Lab, said, "Assuming the grace period for the capital gains surcharge ends, I do not think listings by multiple-home owners will surge sharply," adding, "Among two-home owners, those who have already realized enough gains or face heavy holding tax burdens may put properties on the market." Seo Jin-hyung, a professor in real estate law and administration at Kwangwoon University, added, "The more you regulate multiple-home owners, the more sharply lease-type dwellings such as jeonse will decline, and the damage could ultimately fall on tenants."
Some say the government's regulations on multiple-home owners are not a prerequisite for stabilizing the real estate market. Instead, they argue that easing regulations is needed to give multiple-home owners a chance to list their properties. Yoo Seon-jong, a professor of real estate at Konkuk University, said, "Multiple-home owners clearly play a role in supplying private rental dwellings, but treating them as if they are speculators is something that needs to change," adding, "Through deregulation, we should create a virtuous cycle in which multiple-home owners' dwellings are supplied to the market."