The Regulatory Chokehold... No Listings, Only Rising House Prices

Multi-Homeowners Prefer Gifting Over Selling in First Half
Despite Increases in Comprehensive Real Estate and Acquisition Taxes, No New Listings
Loss of Confidence in Government... Housing Price Instability
Possibility of Sharper Price Rise After June
Democratic Party's Measures Also Confusing, Adding to Chaos

Despite a series of strong real estate regulations, it has been revealed that many multi-homeowners chose gifting over sales this year, leading to analyses that the government's housing price stabilization policy has effectively failed. By focusing solely on tightening loans, taxes, and regulations without properly reading market trends, the government failed to bring out actual listings, instead causing tax pass-through, rising apartment prices, and panic buying, which further destabilized housing for ordinary citizens.

Concerns are rising that real estate market instability could worsen once the increased capital gains tax on multi-homeowners and the monthly rent reporting system are fully implemented from next month, along with the full-scale taxation of holding taxes such as comprehensive real estate tax. Industry insiders predict that if Seoul's ongoing redevelopment project regulations are partially eased and loan regulations are relaxed, especially led by the ruling party, housing prices could sharply rise starting next month.

June Has Finally Arrived... Government Fails to Stabilize Housing Prices

According to the real estate industry on the 31st, the decrease in listings and the upward trend in housing prices around major areas in Seoul and Gyeonggi Province are becoming noticeable. Initially, the government expected that listings would flood the market before June, when the comprehensive real estate tax imposition date and the increased capital gains tax take effect, leading to gradual stabilization of housing prices. However, the volume of listings did not meet expectations.

A representative from A Real Estate Agency in Gaepo-dong, Gangnam-gu, explained, "Apartment listings did not significantly increase in the first half of the year," adding, "There are no listings lowering prices; rather, asking prices are gradually rising." According to the Korea Real Estate Board, last month saw 3,039 housing gifts in Seoul, the highest this year. Although the government raised acquisition tax for recipients of gifted houses threefold last year and significantly strengthened investigations into illicit gifting, these 'gifting prevention measures' failed to produce significant effects.

Senior Research Fellow Doo Sung-kyu of the Korea Research Institute for Construction Industry said, "The temporary stabilization of the real estate market until early this year was due to expectations that supply, which the government had neglected, could expand with the 2·4 measures and the pre-subscription plans for the 3rd new town," adding, "However, trust was greatly lost due to incidents like the Korea Land and Housing Corporation (LH) scandal, and much of that expectation disappeared."

End of Tax Avoidance Listings... Housing Prices Rise Amid Transaction Cliff

The problem is that housing price increases may accelerate further starting in June. The market had already expressed concerns that after the June holding tax imposition date passes and listings avoiding increased capital gains tax enter the market, housing prices could become unstable in the second half of the year. Last year, Seoul apartment prices recorded -0.02% and -0.09% in April and May respectively, then rebounded from June. Although there are differences depending on market sentiment, housing prices also rose more clearly in the second half of 2019 than in the first half.

Senior Research Fellow Doo said, "If new supply does not properly come in, many existing housing listings should appear, but recently the government has strengthened both holding and transaction taxes, leaving no breathing room in the market," adding, "Because there are no clear government measures or movements to resolve this, if market anxiety spreads, the rate of increase could steepen starting as early as next month."

Inconsistent Tax Reforms Further Fuel Confusion

Political confusion surrounding real estate measures is also negatively impacting the market. With a real estate market winter forecasted, the government and ruling party are once again seeking an exit strategy through tax policy, but internal criticism that this contradicts policy consistency is causing the plan to drift, only increasing confusion in the real estate market.

For now, the comprehensive real estate tax is set to be imposed on the 'top 2%', but a revised bill limited to single-homeowners is still under observation. Given significant opposition within the ruling party, the proposal could be derailed during discussions such as the public hearing scheduled next month. The capital gains tax relief plan for single-homeowners (raising the non-taxable threshold) is still under review. Procedures including gathering opinions from the government and experts are planned for June, but opposition is sensed even within the government. A key argument is that under the current system, long-term holding and senior citizen deductions can provide up to 80% exemption.

Above all, tax relief directly contradicts the government's previous real estate policies and raises concerns that it could send the wrong message to the market that 'holding out wins.' An industry insider said, "The government and ruling party intend to reach a conclusion in June, but with divided opinions, finding a compromise seems difficult," adding, "If an indecisive conclusion is reached, it could further agitate public sentiment on real estate."

This content was produced with the assistance of AI translation services.