The presidential office has been confirmed to have called in real estate experts one after another to hear opinions on real estate tax reform and measures to stabilize the lease market. This adds weight to expectations that the reform plan, slated for release at the end of July, is likely to include measures to strengthen holding taxes (comprehensive real estate tax·property tax), including capital gains tax, which has sparked controversy over the abolition of the special long-term holding deduction.
According to the real estate industry on the 21st, the presidential office, led by the land, infrastructure and transport secretary, is calling in real estate experts to hear opinions on measures to stabilize the real estate market. An industry official said, "This is not an official roundtable inviting experts. Individually, experts were called in to ask about real estate market trends and to seek advice on the impact of tax reform," adding, "There were discussions on several pending issues."
The presidential office is said to be maintaining the stance that raising holding taxes is a "last resort," while closely examining the possibility of tax reform. Hong Ik-pyo, senior presidential secretary for political affairs, said in a recent media interview, "If listings dry up after the May 9 start of a (capital gains) heavy taxation measure on multiple-home owners and real estate prices rise around 'one smart, solid home,' the government will use every tool it has," adding, "Holding tax is one of the tools that can be considered in that process." In the industry, abolishing the fair market value ratio for the comprehensive real estate tax and adding an owner-occupancy requirement to the special long-term holding deduction are seen as strong possibilities.
The abolition of the special long-term holding deduction for capital gains tax is also being discussed. President Lee Jae-myung said on his X account on the 18th, "The special long-term holding deduction for capital gains tax is a system that, 'regardless of occupancy,' drastically cuts capital gains tax solely on the grounds of long-term holding," adding, "If earned income, the honest reward for one year of work, exceeds 1 billion won, almost half is paid in taxes, but drastically cutting taxes on unearned real estate speculative income of tens or hundreds of billions of won merely because it was held for a long time (regardless of occupancy) goes against justice and common sense."
Under the current Income Tax Act, the special long-term holding deduction for capital gains tax on single-home owners is applied by adding the holding period and the occupancy period. For example, if a single-home owner holds for 10 years and occupies for 10 years, a special long-term holding deduction of up to 80%—40% each—can be applied. When the special long-term holding deduction is applied, the tax base (the basis on which taxes are levied) is reduced by that percentage. Within the presidential office, they are reportedly not ruling out options that adjust the tax base itself, such as further segmenting and adjusting brackets. An industry official said, "We understand that both holding and capital gains taxes could be reformed with stronger intensity than the market expects," adding, "The tax burden on owners of high-priced apartments in Seoul is expected to increase."
However, it is still difficult to say definitively whether tax reform will proceed as the government intends. The Democratic Party is keeping its distance from the presidential office with voters in mind. That is because real estate tax issues could shake up the electoral landscape in Seoul and other parts of the greater capital area in the June 3 local elections, now just over 40 days away. Kang Jun-hyun, senior spokesperson of the Democratic Party, told reporters the day before, regarding the president's mention of abolishing the special long-term holding deduction for capital gains tax, "The Democratic Party has not reviewed anything at all regarding tax reform." A National Assembly official said, "Even if the presidential office's will to normalize the real estate market is strong, resistance to taxes stemming from increased tax burdens cannot be ignored," adding, "There is considerable opposition within the ruling party."
The presidential office is also reportedly seeking measures to resolve instability in the lease market. As key areas in Seoul and Gyeonggi are designated land transaction permit zones, listings for jeonse and monthly rent are shrinking and prices are soaring. According to Asil, a real estate big data platform, as of the 18th, there were 15,427 apartment jeonse listings in Seoul, down 49.9% from 30,750 on April 18, 2024, two years earlier. According to the Korea Real Estate Board (REB)'s housing price trend survey, the average jeonse price for Seoul apartments in March was 601.49 million won. This is the first time the average jeonse price for Seoul apartments has exceeded 600 million won in 3 years and 5 months, since October 2022 (616.94 million won).