"Moon Administration's Capital Gains Tax Hike Backfires on Housing Price Stability"

Geonsanyeon Report "Prices Instead Rise"

[Asia Economy Reporter Kangwook Cho] A private research institute has evaluated that the Moon Jae-in administration's capital gains tax surcharge policy failed to stabilize housing prices. It pointed out that the rapid policy changes acted as a pressure for price increases, as housing prices surged sharply after the capital gains tax surcharge was implemented.

According to a report released on the 7th by the Construction Industry Research Institute, under the current government, capital gains tax has been used as a major economic adjustment tool, with numerous policy changes such as the imposition of higher tax rates on multi-homeowners and changes in the application method of the special deduction for long-term holdings. In fact, the government announced the capital gains tax surcharge policy for multi-homeowners twice through the August 2nd measures in 2017 and the July 10th measures in 2020. ▶Related article on page 4

However, the report pointed out that contrary to the government's expected effects after the capital gains tax surcharge, housing prices actually surged. In the case of the August 2nd measures, which imposed a 10-20% capital gains tax surcharge on multi-homeowners, the Construction Industry Research Institute explained that the number of apartment and other collective building ownership transfers in Seoul increased by 20% compared to previous years during the eight months until the end of March the following year when the grace period was applied, but prices surged after the grace period ended.

In particular, the report stated that after the grace period for the July 10th measures last year ended this year, ownership transfers decreased more sharply and the rate of price increase was larger. According to the Court Registry Information Plaza, the number of registrations in May, just before the surcharge, was 33,794, but it sharply dropped to 25,530 in June. According to the KB Housing Market Trend survey, the Seoul housing sales price increase rate also expanded from 0.80% in May to 1.01% in June and July, and 1.19% in August.

Researcher Yoonkyung Heo explained, "Before the capital gains tax strengthening, temporary relief measures aimed to stabilize prices by increasing sales from multi-homeowners, but with a time lag, it appeared as a rise in housing prices," adding, "Rapid policy changes in a short period rather increased the volatility of sales volume, acting as a pressure for price increases."

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