Will the Capital Gains Tax Surcharge Postponement Happen?... Market on Alert Amid 'Lee Jae-myung and Blue House' Confrontation

Temporary Capital Gains Tax Relief Sparks Disagreement Between Ruling Party and Blue House
Postponing Heavy Taxation Could Increase Listings and Stabilize Housing Prices
However, Blue House Opposes... Undermining Policy Consistency

Seoul Licensed Real Estate Agent Office [Image source=Yonhap News]

Differences of opinion continue between the ruling party and the Blue House regarding the temporary suspension of the capital gains tax surcharge on multi-homeowners. Lee Jae-myung, the Democratic Party presidential candidate, supports the implementation of a temporary suspension, arguing that it could lead to a surge in housing supply. However, the Blue House opposes the move, citing concerns that it could undermine policy consistency, suggesting that confusion is likely to persist for the time being.

According to the real estate industry on the 18th, market attention is focused on the Blue House's opposition to Lee Jae-myung's recent proposal for a temporary suspension of the capital gains tax surcharge on multi-homeowners. Strengthening the capital gains tax is one of the Moon Jae-in administration's key real estate regulatory policies. Currently, the government imposes a basic tax rate of 6-45% on capital gains from home sales, with an additional surcharge applied to multi-homeowners. For example, the highest tax rate for owners of three homes can reach up to 82.5%.

Industry insiders say that the capital gains tax burden is so heavy that the appearance of listings in the market is limited. In Seoul, for instance, transaction costs?including capital gains tax, acquisition tax, and real estate agent fees?exceed 100 million won for homes around 30 pyeong (approximately 99 square meters), causing transactions to freeze. Especially within the Democratic Party, voices calling for some relaxation of capital gains tax regulations have emerged as the announcement of the standard single-family home official price at the end of this month raises concerns about potential public discontent.

According to political circles, Lee proposed a plan to delay the capital gains tax surcharge on multi-homeowners for one year on a temporary basis. The plan includes a full exemption of the surcharge if the home is sold within six months, a 50% surcharge for sales within nine months, and a 25% surcharge for sales within twelve months, applying differentiated rates depending on the timing of the sale. Yoon Hu-duk, head of the policy division of the Democratic Party's election committee, said in a radio interview the day before, "If the (capital gains tax surcharge) suspension is implemented, a large volume of supply will come out, stabilizing the housing market."

Many in the market analyze that if the capital gains tax is eased, the increase in listings from multi-homeowners could help stabilize housing prices. A real estate agent in Yeongdeungpo-gu said, "Even after deducting taxes and transaction costs from apartment sales, there isn't much left, and since no one knows when regulations will be eased, multi-homeowners are currently holding on," adding, "If the capital gains tax is eased, listings are expected to increase."

However, the Blue House, which has maintained a stance of strengthening real estate regulations, opposes the suspension of the capital gains tax surcharge, making actual implementation unlikely. Park Soo-hyun, Senior Secretary for Public Communication to the President, stated the day before, "We believe that the current stabilization trend in the real estate market has been hard-won," and added, "At this point, we need to be cautious about easing the capital gains tax surcharge." Earlier, Lee Cheol-hee, Senior Secretary for Political Affairs, also conveyed opposition to the ruling party leadership on the 14th.

Some within the Democratic Party also oppose easing the capital gains tax. They argue that weakening the government's real estate policy consistency could raise market expectations for further deregulation, potentially leading to more listings. Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, also commented earlier this month on the temporary reduction of the capital gains tax, saying, "During the legislative process, it could cause renewed instability in the real estate market due to the recall of existing listings made in anticipation of tax savings."

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