President's Strong Stance on Eradicating 'Unearned Real Estate Income', Capital Gains Tax Repercussions and Market Outlook?

President Lee Jae-myung has declared an 'escape from ruinous unearned real estate income', strongly hinting at the possibility of tax reforms, including capital gains taxes for multiple homeowners. Immediately following this remark, a fierce debate has ensued in online communities and the real estate market, with concerns about a 'tax bomb' clashing with hopes for the eradication of speculation.

Stronger Capital Gains Tax for Multiple Homeowners: What's the Background?

Recently, housing instability for ordinary citizens has worsened as jeonse (key money deposit) prices in Seoul and core metropolitan areas have soared to their highest level in 6 years and 5 months. The government points to speculative demand, such as gap investments by multiple homeowners, as one of the causes of this market overheating.

• Enhancing Tax Equity: The intention is to realize tax justice by clawing back excessively high unearned real estate income compared to labor income.
• Securing Housing Stability: This is interpreted as a move to promote housing stability for the working class by suppressing speculative demand and restructuring the housing market around actual end-users.
• Securing Tax Revenue and Welfare Funds: There is also the possibility that the enhanced tax revenue, such as the capital gains tax, will be used as financial resources for housing welfare, such as public rental housing.

Repercussions and Outlook for the Real Estate Market

If intense real estate tax reforms become a reality, significant repercussions are expected in the market. In the short term, the 'lock-in effect' of properties held by multiple homeowners may worsen. This is because there is a high probability that they will delay selling their homes or bypass the tax burden through gifting due to the capital gains tax.

On the other hand, if holding taxes (comprehensive real estate holding tax and property tax) are increased concurrently, urgent sales unable to withstand the tax burden may pour out, acting as downward pressure on housing prices. Experts predict that market volatility will expand significantly depending on the level and implementation timing of future concrete tax reform plans.

FAQ: Key Questions Regarding Real Estate Policy

Q1. How specifically will the capital gains tax for multiple homeowners change?

Although a concrete reform plan has not yet been announced, looking at past examples, there is a high possibility that discussions will involve raising the heavy capital gains tax rate for multiple homeowners or increasing the tax rate on short-term housing holdings. We must keep a close eye on follow-up announcements from the National Assembly's Strategy and Finance Committee and the Ministry of Land, Infrastructure and Transport.

Q2. How will real estate market buying sentiment change?

A wait-and-see attitude is expected to deepen until policy uncertainty is resolved. In particular, with mortgage interest rates remaining at a high level, non-homeowning actual end-users are also highly likely to stay in the subscription or jeonse/monthly rent market and observe the market situation rather than making hasty purchases.

Q3. Will the preference for 'one solid prime property' grow stronger?

As the punitive nature of taxes on multiple homeowners strengthens, it is highly likely that the polarization phenomenon of concentrating assets from provincial or suburban areas into the so-called 'one solid prime property' in core areas of Seoul and the metropolitan area will worsen even further.