Real estate taxation has been a policy tool that successive administrations repeatedly pulled out to curb home prices or revive transactions. During periods of rising prices, they increased the burden of property taxes and capital gains taxes to restrain multiple-home ownership and demand for short-term profits, while in downturns they lowered the tax burden to encourage a recovery in transactions.
The problem is that the tax system was used as a market response tool tailored to each administration rather than guided by long-term principles, hurting predictability. Tougher taxes led to listings being locked up and resistance to taxes, while looser taxes sparked investment demand and stirred debate over asset gaps.
Some note that because real estate taxes have repeatedly swung between tightening and easing under different administrations, the market has settled on the view that "you just have to hold out until the administration changes."
◇ Tax tightening that made both holding and transactions difficult
The Roh Moo-hyun administration made real estate taxation the core tool for curbing speculation. In 2005, when home prices were surging, it introduced the comprehensive real estate tax to raise the burden on high-priced homes and multiple-home ownership. It then increased the comprehensive real estate tax burden through housing measures and pushed to apply heavier capital gains taxes to owners of two or more homes per household. Excluding the special deduction for long-term holding was also discussed.
The goal was clear. It aimed to reduce price appreciation gains from high-priced homes and multiple-home ownership and to induce multiple-home owners to list properties. The market responded differently. Although the property tax burden grew, once capital gains taxes also rose, more people chose to hold, make gifts, or convert to rentals rather than sell. This is the so-called "listings lock-up."
As the tax system pressured multiple-home owners, preference strengthened for a single high-priced, core-area home, the so-called "one smart home." Based on an industry estimate using the Korea Real Estate Board (REB) apartment sale price index, apartment prices nationwide rose 64.1% and apartment prices in Seoul rose 74.4% during the Roh Moo-hyun administration.
The Moon Jae-in administration also moved to stabilize the market through taxes. As home prices climbed rapidly on low interest rates and ample liquidity, it rolled out heavier capital gains taxes on multiple-home owners in designated adjustment areas, strengthened the comprehensive real estate tax, and imposed higher acquisition taxes in succession. In 2020, mid-administration, as the upward trend in prices did not break, it raised the maximum surcharge rate on the comprehensive real estate tax for multiple-home owners to 6% and applied the top rate to dwellings held by corporations. It also increased the acquisition tax rate for multiple-home owners to as high as 12%.
The approach of raising property, acquisition, and capital gains taxes at the same time revived the side effects seen under the Roh Moo-hyun administration. As the burden of selling grew, transactions decreased, and as expectations for rising prices did not break, some landlords tried to pass the increased tax burden on to tenants. By the same industry estimate, apartment prices nationwide rose 78.3% and apartment prices in Seoul rose 106.3% during the Moon Jae-in administration.
The Lee Jae-myung administration has also signaled a tax overhaul to stabilize the real estate market. Stronger property tax burdens, adjustments to the special deduction for long-term holding, and reduced tax benefits for multiple-home owners are being discussed. However, until the tax law amendments are finalized, the market is likely to remain in wait-and-see mode.
◇ Easing taxes revived transactions but stirred controversy over investment demand
By contrast, the Lee Myung-bak administration significantly eased the real estate tax regime that had been tightened under the Participatory Government. Amid the global financial crisis and a slump in the housing cycle, restoring transactions became the top task. It raised the taxable threshold for the comprehensive real estate tax and lowered the rate on the housing portion. It also reduced the capital gains tax burden and moved to abolish the capital gains surcharge on multiple-home owners. In 2011, it temporarily cut the acquisition tax on dwellings by 50%.
While easing the tax burden helped the recovery in transactions, it also drew criticism for lowering the holding expense for owners of high-priced real estate and multiple-home owners, weakening functions to reduce asset inequality and curb speculation. Still, home prices showed stability. By the same metric, during the Lee Myung-bak administration apartment prices nationwide fell 4.2% and apartment prices in Seoul fell 10.4%.
The Park Geun-hye administration also focused on stimulating demand to revive the sluggish housing market. As demand for jeonse did not shift to purchases at the time, it pursued a permanent cut in acquisition taxes and the abolition of the capital gains surcharge on multiple-home owners. Saying it would increase private rental supply, it also gave acquisition tax, property tax, and capital gains tax benefits to rental business operators.
This policy was credited with contributing to the normalization of transactions, but it also drew criticism for lowering holding costs for multiple-home owners and opening a workaround through the rental business operator system. During the Park Geun-hye administration, apartment prices rose 16.7% nationwide and 17.6% in Seoul.
The Yoon Suk-yeol administration focused on rolling back the burdens of the comprehensive real estate tax and capital gains tax, which had been sharply strengthened under the Moon Jae-in administration. It raised the basic deduction for the comprehensive real estate tax and lowered rates. It also temporarily excluded the capital gains surcharge for multiple-home owners. During the Yoon Suk-yeol administration, apartment prices nationwide fell 5.99%, and apartment prices in Seoul rose only 3.26%.
◇ With tax effects weakened, a long-term principle is needed
The problem is that the real estate tax system has become excessively complex. As goals such as price stability, normalization of transactions, curbing speculation, and securing tax revenue were layered on by each administration, the tax system became hard to predict. The term "yangpose" even emerged in the market, meaning capital gains taxes change so often that even tax accountants give up on calculating them.
Taxes directly affect long-term decisions such as whether to buy, sell, or make a gift. But when the real estate tax system changes frequently, people wait for the next administration's tax changes rather than acting according to tax principles. That is why the market does not respond immediately even when strong tax policies are rolled out.
Lee Chang-hee, an emeritus professor at Seoul National University School of Law, noted in the paper "A look back at and outlook for the real estate property tax" that the property tax and the comprehensive real estate tax have come to embody multiple policy goals and political hues, leaving the legal framework in disarray. The point is that for real estate taxation to function as a market-stabilizing tool, long-term principles must come before short-term prescriptions.
Experts say the roles of property taxes and transaction taxes must be clearly divided. One expert, who requested anonymity, said, "Property taxes should reflect the social expense of holding real estate, while transaction taxes and capital gains taxes should be designed so as not to block listings," adding, "Unless we fix a structure in which the tax regime swings widely every time the administration changes, the policy effect of real estate taxation will only weaken further."