They are effectively viewing owners of multiple homes as the agents of speculative demand and trying to manage the market through policy messages aimed at them. The goal of real estate policy should be to help the market function smoothly, not to punish a particular class (owners of multiple homes).
Shin Bo-yeon, a professor in the Department of Real Estate AI Convergence at Sejong University, assessed that the government has recently been ratcheting up pressure on owners of multiple homes with the stated goal of "stabilizing the real estate market." On May 9, the government ended the grace period on the heavier capital gains tax for owners of multiple homes and, by strengthening regulations on loans and holding taxes, is seeking to stabilize the real estate market by bringing their listings to market.
On the 5th at Sejong University's campus in Gwangjin-gu, Seoul, Shin made clear that "stabilizing the real estate market" is a goal our society should achieve, but said, "In the short term, it may look stabilized as transactions occur below prevailing prices due to listings from owners of multiple homes under regulation, but in the long run it looks difficult to help stabilize the market."
Regarding talk of possible government tax reforms this year in the second half, including raising holding taxes, Shin said, "I think the reason the government is trying to raise the holding tax is a perception that the Jan. 29 supply measures are insufficient," adding, "If the supply measures had been sufficient, there would have been no need for tax reform. Tax reform is simply, 'Since supply is not sufficient, we will suppress demand with taxes,'" criticizing the approach.
Shin's diagnosis is that if holding taxes are strengthened even for a so-called "smart single home," polarization will worsen. Shin said, "Rents could rise due to higher holding taxes, further deteriorating the jeonse and monthly rental market, and as only high-income earners able to bear the holding tax burden can own high-priced dwellings, the 'Gangnam premium' could become even more extreme."
Shin added, "We need to rationally redesign the entire real estate tax system covering acquisition, holding, and transfer in line with the principles of taxes," and said, "Lower transaction taxes to smooth the cycle of sales, and gradually make holding taxes more realistic while easing the burden on end users such as single-home owner-occupiers."
The Lee Jae-myung administration has signaled it will deploy a range of policy tools to normalize the real estate market. Additional demand-suppression measures and dwelling supply measures may follow. Is the government's policy direction the right one? What housing strategy should consumers adopt going forward? We asked Shin for advice on these questions. The following is a Q&A with Shin.
—What impact do you think the recent trend of tightening regulations on owners of multiple homes will have on the market?
It is a policy that hinders the healthy circulation of the market. If owners of multiple homes, unable to bear the tax burden, put urgent listings on the market, prices may appear to fall in the short term. Most owners of multiple homes with financial capacity will judge that "holding on" until a period of deregulation is more advantageous than listing now. As a result, after urgent listings are absorbed, a severe listing freeze emerges with properties disappearing from the market, paradoxically causing prices to rise again. If the government truly wants to draw listings from owners of multiple homes into the market, it should use the carrot, not the stick.
The government has begun work on real estate tax reform. There is also a possibility of higher holding taxes. How will the market react?
I think the reason the government is trying to raise the holding tax now is a perception that the Jan. 29 supply plan is insufficient. As only high-income earners who can bear the holding tax burden are able to own high-priced dwellings, the Gangnam premium could become even more extreme. If tax reform is necessary, it should be implemented consistently with sufficient lead time, and it should be designed with both end-user protection and expanded opportunities for asset building in mind, rather than short-term prescriptions that suppress demand. Right now, instead of tax reform, the focus should be on enabling smoother redevelopment and reconstruction, which account for most of Seoul's dwelling supply. If regulations are eased and incentives for private-sector participation are increased, supply will naturally rise and voluntary listings will come to market. Then the market will normalize without tax hikes.
By saying the "Gangnam premium will become extreme," do you mean concentration in Seoul's prime locations will intensify?
The "smart single home" phenomenon is not a simple fad but the result of years of accumulated government policies and market learning. Punitive taxation of owners of multiple homes pushed demand toward a "smart single home" rather than "several homes," and the experience that prime Seoul real estate trends upward is concentrating demand even more in one place. As income polarization and wealth gaps widen, competition to preempt scarce prime assets will inevitably intensify.
Is there a way to ease this phenomenon?
The solution should not be "suppressing prime areas," but "making other areas attractive." For example, we should revitalize redevelopment north of the Han River to radically improve the residential environment and swiftly expand metropolitan transit networks like the Great Train Express (GTX) so excellent new towns in Gyeonggi Province can share Seoul's functions. Using successful self-sufficient city models like Pangyo as role models in key provincial cities, instilling the perception that people can enjoy quality jobs and living environments without coming to Seoul, will be the fundamental solution.
Please assess the government's Jan. 29 supply measures.
It is positive in itself that the government recognized the importance of supply and released measures. The problem is feasibility. In fact, the Moon Jae-in administration announced similar measures, but most fell through. Obstacles remain, including resistance from local governments, conflicts with local residents, and delays in approvals and permits. Strong government will alone is not enough; genuine supply expansion starts with easing regulations and respecting the private sector's autonomy so it is actively encouraged to participate in the market. In Seoul, where redevelopment and reconstruction account for about 80% of dwelling supply, invigorating the private sector through regulatory easing and incentives is more effective and more feasible than government-led announcements of "tens of thousands of homes."
After the announcement of these supply measures, how should one approach a dwelling purchase strategy?
I recommend a cautious approach to dwelling purchase strategy. That said, this is by no means a bad entry opportunity. Even if the plan through 2030 is realized, it will take at least four to five years until move-in, and there will not be many move-in units over the next few years. Even 20 to 30 years ago, it was difficult to purchase a prime-area dwelling in one go. The key is not the best location but finding the best location within your means. Prioritize factors that increase your quality of life—such as proximity to work, children's education, and living infrastructure—and, rather than using excessive leverage, choose within a sustainable repayment structure for long-term safety.
How should one approach the real estate markets in Seoul and the provinces?
I expect the greater Seoul dwelling market to show an overall trend of "stable increases," with sharper differentiation by area and product. While the high interest rate environment persists and loan regulations act to suppress demand, structural supply shortages centered on Seoul and mounting upward pressure on jeonse prices are stoking the sales market.
The provincial real estate market has entered a "structural transition period" that requires a different approach than the greater Seoul area. A joint rise like in the past will be hard to expect, but regional values will be clearly differentiated, making this a critical time for sophisticated analysis to find new opportunities amid crisis. Some regions will show potential comparable to the greater Seoul area. Prime areas of metropolitan cities representing each region will absorb the population and infrastructure of surrounding small and midsize cities. In addition, self-sufficient cities where large industrial complexes or research and development zones are created and quality jobs are generated can secure independent upward momentum regardless of external variables. The provincial real estate issue has now reached a major turning point where, beyond simple market outlooks, we must seek new growth potential from a macro perspective of balanced national development.