Lee Jae-myung Style Real Estate Policy Reversal... "Consistency Undermined, No Listings Before Presidential Election" Criticism

Last Year’s July 10 Real Estate Measures Set Top Tax Rate at 75%... Implemented in June This Year After a Grace Period
With the Presidential Election Schedule, "Exemption from Heavy Taxation for Multi-Homeowners if Sold Within 6 Months"

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kim Hyunjung] As Lee Jae-myung, the Democratic Party presidential candidate, unveiled a temporary capital gains tax relief card for multi-homeowners, criticism has arisen that it is a pledge with no effect on market stabilization or the release of listings. The candidate’s proposal to reverse the existing policy and provide tax benefits to multi-homeowners, who have been subject to punitive taxation throughout former President Moon Jae-in’s term, is said to undermine policy consistency and is unlikely to produce a real effect in releasing listings. There are also concerns that the frequently changing real estate policies may only fuel interest in real estate investment.

According to the National Assembly and the Ministry of Economy and Finance on the 14th, candidate Lee is considering a capital gains tax relief plan that temporarily lowers the top 75% tax rate for multi-homeowners and offers full exemption depending on the timing of the sale. The plan involves a one-year grace period starting from June, during which the capital gains tax surcharge?previously up to 75% on housing sale profits?would be suspended. Based on a specific date, the proposal exempts 100% if sold within 6 months, 50% if sold within 9 months, and 25% if sold within 12 months.

Under current law, the capital gains tax rate for multi-homeowners in regulated areas is increased by 20 percentage points for two-homeowners and 30 percentage points for three-homeowners, resulting in top rates of 65% and 75%, respectively, on the basic tax rate (6?45%). These rates were finalized in last year’s July 10 real estate measures, which strengthened the surcharge rates and have been in effect since June 1 of this year after a grace period. Candidate Lee proposes to postpone this implementation date again and grant greater tax exemptions the sooner the property is sold.

The government has stated that it has neither reviewed nor plans to review such measures. A Ministry of Economy and Finance official said, "In a situation where the real estate market stabilization trend has been hard-won, suspending the capital gains tax surcharge for multi-homeowners would have significant side effects," adding, "Expectations of a grace period could lead to a freeze in listings and destabilize price stability." The official emphasized, "The capital gains tax relief measure has not been discussed within the government, nor is there any plan to pursue it," reaffirming the stance announced earlier this month.

The market also points out that candidate Lee’s measures are unlikely to produce immediate listing effects and will only undermine policy credibility due to ongoing patchwork tax policies. In particular, the "within 6 months" period mentioned by the candidate coincides with the presidential election period, making it a clearly vote-seeking, populist measure.

Since the government’s capital gains tax surcharge in June, the number of housing transactions has sharply declined, especially in Seoul and the metropolitan area. According to the Korea Real Estate Board, the number of housing transactions in Seoul, which was around 10,629 in October last year, dropped by 23.4% to 8,142 in October this year. This is the lowest level in about 29 months since May 2019 (8,077 transactions).

Professor Kwon Dae-jung of Myongji University’s Department of Real Estate explained, "Considering recent market trends, even if the candidate’s plan is implemented, there will be no release of listings until the presidential election results in March next year, and the turning point will be the election," adding, "If Yoon Seok-youl, the People Power Party candidate who has clearly stated he will ease real estate taxes, is elected, multi-homeowners may judge that holding properties is advantageous." Professor Kwon pointed out, "At this point, suspending and easing the surcharge is tantamount to admitting that the surcharge was wrong," and added, "In that case, the surcharge itself should be reconsidered."

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