Will the 'Capital Gains Tax Hike' Card Work at the End of the Regime? The Market Is Already Skeptical...

Market Experts: "Insufficient to Induce Multi-Homeowners to Sell... House Price Stability Not Achieved Through 'Tax Policy'"

[Image source=Yonhap News]

[Asia Economy Reporters Son Seon-hee (Sejong), Jang Se-hee] The ruling party has unveiled a plan to strengthen capital gains tax on multi-homeowners, but skepticism is already emerging in the market. With the next presidential election just over eight months away, there are concerns that it is insufficient to induce multi-homeowners to sell properties through tax measures at the end of the administration's term.

On the 2nd, Yoo Dong-soo, Senior Deputy Chairman of the Policy Committee of the Democratic Party of Korea, proposed an amendment to the Income Tax Act to calculate the application period of the special long-term holding deduction for real estate capital gains tax from the point when the taxpayer becomes a single-homeowner. This means that multi-homeowners will not receive the special long-term holding deduction benefits, which reduce capital gains tax by up to 80% depending on the holding and residence period. Additionally, for single-homeowners who actually reside in their homes, the capital gains tax exemption threshold will be relaxed from the existing 900 million KRW to 1.2 billion KRW, and the special long-term holding deduction rate according to the holding period will be applied differentially based on the capital gains amount.

This amendment reflects the party's official stance confirmed through the Democratic Party's Special Committee on Real Estate and the party caucus, and it is planned to be processed in the upcoming extraordinary session of the National Assembly this month. If the bill passes, the easing of capital gains tax for single-homeowners and the differential application of deduction rates by capital gains size will be applied immediately to acquisitions made after the law's revision. However, the reduction of the special long-term holding deduction for multi-homeowners will be implemented from January 1, 2023, with a different effective date. Regarding this, Senior Deputy Chairman Yoo said, "It is intended to give multi-homeowners sufficient time to dispose of their properties," but there is also an interpretation that political considerations are behind this. Professor Shim Gyo-eon of Konkuk University's Department of Real Estate said, "Implementing it from 2023 means 'we are giving them a break for now,'" and criticized, "The ruling party is changing capital gains tax here and there based on 'votes' rather than market effects."

Experts believe that even if this policy is implemented, the likelihood of multi-homeowners putting their properties on the market is low. Above all, next year's 'presidential election' is the biggest variable. It is expected that multi-homeowners, who have endured even when capital gains tax rates including local taxes exceed 80%, will wait for a regime change and the resulting changes rather than putting their properties up for sale. Professor Kwon Dae-jung of Myongji University's Department of Real Estate said, "Trust in real estate policy has already declined, and the government is under a huge misconception," adding, "It is impossible to stabilize the housing market through taxes." He continued, "The rental market stabilizes only when the sales market stabilizes, and for that, there must be a large supply of new housing," emphasizing, "Increasing supply is the answer."

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