"South Korea's Real Estate Tax Rate Ranks 4th in OECD... Tax Burden Hinders Market Stabilization"

Hana Financial Management Research Institute Real Estate Tax Analysis Report
"Stabilization Should Be Achieved Through Supply and Demand Rather Than Transaction and Capital Gains Tax Adjustments"

Reference image / Yonhap News

[Asia Economy Reporter Kim Hyo-jin] Among the taxes borne by the people of South Korea, the proportion of real estate taxes is the fourth highest among the Organization for Economic Cooperation and Development (OECD) countries. In particular, it has been pointed out that the government's tax system under the pretext of speculation prevention negatively affects the homeownership of actual demanders, hindering market stabilization.

On the 19th, Gu Gang-mo, a research fellow at Hana Financial Management Research Institute, analyzed this in a report titled "Comparison of Domestic Real Estate Tax System and Overseas Systems."

South Korea's ratio of real estate-related taxes to gross domestic product (GDP) was 3.12% as of 2019, ranking 7th among OECD countries. Gu predicted that the ratio would be higher than 3.12% when reflecting various real estate tax rate increases implemented from last year to this year.

The proportion of real estate taxes among total taxes in South Korea was 11.4%, ranking 4th after the United Kingdom, the United States, and Canada.

The problem is that such a high tax rate negatively affects the stability of the housing market. Researcher Gu judged that the positive impact is unclear, contrary to the government's intentions.

The tax system focused on speculation prevention negatively impacts actual demanders' homeownership, resulting in insufficient achievements in market stabilization.

Despite the government's efforts to reform real estate-related tax systems to stabilize the housing market, housing supply rates and homeownership rates remain stagnant except in some cities.

According to Hana Financial Management Research Institute, the gap between urban and rural areas in homeownership rates in the metropolitan area has significantly widened. As of 2019, the nationwide housing supply rate was 104.8%, and the housing possession rate and homeownership rate recorded 61.2% and 68.8%, respectively.

Researcher Gu diagnosed that tax resistance against strengthening real estate taxes is observed, and side effects such as property hoarding and intra-family gifting occur, making the impact of real estate tax increase policies on housing market stabilization unclear.

He also pointed out that South Korea has lower holding taxes and higher transaction taxes compared to major countries, creating transaction barriers.

Researcher Gu said, "Due to the tax rate increases, the tax burden on homeowners and prospective buyers is excessive, leading to increased property hoarding and gifting, which adversely affects housing supply and price stabilization," and suggested, "Rather than adjusting the relatively high transaction and capital gains taxes compared to other countries, market stabilization should be sought through medium- to long-term supply and demand stability."

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