An empirical analysis found that monthly rents soar when property holding taxes, including the comprehensive real estate tax, are increased. This suggests landlords pass on holding taxes to tenants. According to the analysis, during the Roh Moo-hyun administration (2003–2008), when the comprehensive real estate tax was introduced, monthly rents rose by more than 20%. During the Moon Jae-in administration (2017–2022), when the comprehensive real estate tax was expanded and strengthened, monthly rents likewise rose by more than 30%.
The comprehensive real estate tax was enacted on Jan. 5, 2005, during the Roh Moo-hyun administration, and the tax burden was eased on Sept. 1, 2008, under the Lee Myung-bak administration with the "9·1 tax reform plan." However, after the Moon Jae-in administration took office, the rate was raised again through the "Measures to stabilize the housing market" on Sept. 13, 2018, and the "Plan to stabilize the housing market" on Dec. 16, 2019.
According to academia on the 28th, the research lab of Professor Lee Chang-mu at Hanyang University released to the National Assembly on the 27th a study titled "Assessment of the real estate market and policies in the early Lee Jae-myung administration." To identify the pass-through effect of the comprehensive real estate tax on monthly rents, the study analyzed comprehensive real estate tax collections in Seoul, Gyeonggi, and Incheon from 2005 to 2022, as well as monthly rent indexes and monthly rent time-series data from 2006 to 2023.
To examine only the relationship between comprehensive real estate tax collections and monthly rents, factors such as the supply and demand of dwellings and the macroeconomy were controlled for. Monthly rent levels were measured separately using two indicators: the Budongsan R114 monthly rent index and a proprietary actual transaction price index based on registered actual transaction prices with the Ministry of Land, Infrastructure and Transport (MOLIT). Both the Budongsan R114 monthly rent index and the actual transaction price index set January 2011 monthly rent at the base value of 100 to gauge relative levels. However, because comprehensive real estate tax collection statistics were only used through the end of 2022, the analysis could not cover monthly rent growth after that.
According to Professor Lee, in 2005, the first year of implementation, Seoul's comprehensive real estate tax collections were 28.9 billion won, but they rose to 382.4 billion won in 2006 and reached 903.7 billion won in 2007, nearing 1 trillion won. In 2008, 610.7 billion won was collected. The 2008 decline in comprehensive real estate tax collections was due to factors such as the global financial crisis and the phased application of the Lee Myung-bak administration's tax reduction policy (the 9·1 tax reform plan). Total collections from 2005 to 2008 were 1.9259 trillion won.
Seoul's Budongsan R114 monthly rent index was 79.80 in January 2005. It rose to 80.70 in December 2006 and to 90.05 in December 2007. By the end of the following year, 2008, it climbed to 96.18. The index rose 20.5% (16.38 points) during this period.
During the same period, Gyeonggi Province's comprehensive real estate tax collections increased from 6 billion won in 2005 to 107.3 billion won in 2006, with 284.9 billion won collected in 2007 and 165 billion won in 2008. Total collections were 563.2 billion won. Over this period, Gyeonggi's Budongsan R114 monthly rent index also rose 17.8% (14.82 points), from 82.91 in January 2005 to 97.73 at the end of 2008.
Following the introduction and strengthening of the comprehensive real estate tax during the Roh Moo-hyun administration, monthly rents in Seoul and Gyeonggi rose by about 20%. Professor Lee Chang-mu said, "An analysis and assessment of monthly rent transaction prices reveals a movement in which the comprehensive real estate tax leads to a surge in monthly rents."
A similar pattern appeared under the Moon Jae-in administration. The Moon administration, which began in May 2017, rolled out the "9·13 real estate measures" and the "12·16 real estate measures," using tighter regulations such as increases in the comprehensive real estate tax rate. This stance continued until the Yoon Suk-yeol administration confirmed a tax reform plan in 2022 (July 21, 2022) that lowered the comprehensive real estate tax rate for multiple-home owners and raised the basic deduction.
In 2018, the year after the Moon Jae-in administration took power, Seoul's comprehensive real estate tax assessment was 275.4 billion won, but it increased to 619.3 billion won in 2019, and tax revenue continued to rise in 2020 (996.5 billion won) and 2021 (2.3741 trillion won). Total collections during this period were 4.2655 trillion won.
The Budongsan R114 monthly rent index was 103.74 in January 2018, slightly above January 2011, the base year. However, after the comprehensive real estate tax was strengthened, it rose to 114.36 in December 2021 and climbed to 123.46 in 2022, the final year of the Moon Jae-in administration. The cumulative increase in the monthly rent index during this period was 19.0% (19.72 points).
The surge in monthly rents is also evident in the proprietary actual transaction price index calculated by Professor Lee's lab based on Ministry of Land, Infrastructure and Transport (MOLIT) actual transaction prices. In January 2018, the monthly rent actual transaction price index was 96.39, below January 2011, the base year. But by December 2022, it had risen to 127.32. The cumulative increase was 32.08% (30.93 points). This means someone paying a monthly rent of 1 million won in 2018 had to pay 1.32 million won by the end of 2022.
Professor Lee said, "The introduction and strengthening of the comprehensive real estate tax during the Roh Moo-hyun administration led to a surge in monthly rents close to 20%, and the re-strengthening of the comprehensive real estate tax during the Moon Jae-in administration led to a surge of 30% to 40% in monthly rents, based on the actual transaction price index." Professor Lee added, "Because we analyzed comprehensive real estate tax collections only through the end of 2022, we did not analyze the trend of rising monthly rents in some areas such as Seoul after the Yoon Suk-yeol administration announced a tax cut." He said, "However, we expect that the recent rise in monthly rents was driven not only by the comprehensive real estate tax but also by other regulations such as the government's lending curbs, which created upward pressure." The study was released as the keynote presentation at the policy seminar "Are the current real estate policies acceptable?" held at the National Assembly Members' Office Building on the afternoon of the 27th.
A real estate industry official said, "When the government tightens holding taxes, landlords tend to pass the tax burden on to tenants, and for this reason the strengthening of holding taxes leads to higher monthly rents."