[Resumption of Higher Capital Gains Tax After 4 Years] 1 in 3 Respondents Says "Raising Effective Holding Tax Rates Needed to Prevent Excessive Real Estate Investment"

Survey of Real Estate Experts and Frontline Agents

"Strengthen Holding Taxes, Ease Capital Gains Tax"—Majority Support

Many Say Stronger Holding Taxes Needed to Prevent Capital Concentration

Editor's Note
With the heavy capital gains tax for multiple-home owners set to take effect in just over a month, the real estate market is holding its breath. Since President Lee Jaemyung confirmed the plan to enforce higher capital gains tax in January, housing prices in the three Gangnam districts have shown a slight downward trend, while in outlying areas such as northern Seoul, lower-priced purchases have led to an upward curve. The market is now looking to what will happen after May 10, when the increased capital gains tax is implemented. Some predict that limited listings will push prices up, while others expect the introduction of a heavy holding tax will drive more properties onto the market. The Asia Business Daily conducted a survey of 28 real estate and financial sector experts, including frontline real estate agents, asking about market trends and forecasts before and after the implementation of the higher capital gains tax. At the time of the survey earlier this month, the government planned to apply the grace period to contracts signed up to May 9, but later expanded the scope to include those who have applied for land transaction permits. Since the timing of approval for land transaction permits can vary, this adjustment was intended to eliminate uncertainty for transaction parties.

Apartment buildings in downtown Seoul. Photo by Yonhap News

Real estate experts believe that, in order to stabilize the market, transaction taxes such as the capital gains tax should be eased as part of broader tax reforms. Although the current administration has already decided to impose a higher capital gains tax on multiple-home owners after May 9, the experts argue that, to continuously encourage property listings, it is more effective to strengthen holding taxes rather than transaction taxes. There is a split between those who insist that the heavy tax rate should be abolished entirely for market stability, and those who argue it should be maintained but adjusted according to market conditions.

In a survey conducted by The Asia Business Daily of 28 real estate experts earlier this month, 53.6% (15 respondents) said that “holding taxes should be strengthened while capital gains taxes should be eased” in order to stabilize the real estate market. The view was that lowering transaction taxes would make buying and selling easier in the market.

However, there were also experts who held more extreme views regarding whether the heavy tax rate should be abolished or maintained. 17.9% (5 respondents) supported “complete abolition of the heavy tax rate and unification with the standard tax rate.” One expert explained, “If someone sells a home and has to pay up to 82.5% in capital gains tax, they would be more likely to hold on to their property rather than sell. Even if not immediately, the market will see more listings only if the capital gains tax is abolished for at least five to ten years.”

On the other hand, 14.3% (4 respondents) answered that “the heavy capital gains tax should be maintained, but adjusted depending on market conditions.” Including the one expert (3.6%) who responded that “the heavy tax system should be maintained or strengthened,” the number of respondents at both extremes is nearly equal.

Experts generally agreed with the current administration’s direction of strengthening holding taxes such as the property tax and comprehensive real estate tax. The largest share of respondents, 67.9% (19 experts), said that holding taxes should be strengthened and transaction taxes eased. Conversely, only 14.3% (4 respondents) said that both holding and transaction taxes should be eased, allowing the market to adjust itself according to market principles.

The burden of holding taxes is gradually increasing in tandem with rising housing prices. The officially assessed price of apartment complexes in Seoul jumped by an average of 18.67%, the largest increase in five years. According to last year’s comprehensive real estate tax notification, the total amount billed was 5.3 trillion won, up 300 billion won from the previous year’s 5 trillion won. The number of people subject to the tax also increased by 81,000 in one year, reaching 629,000.

Many respondents also said that strengthening holding taxes is necessary to prevent excessive capital from flowing into real estate assets. Specifically, 35.7% (10 experts) chose “raising the effective holding tax rate (increasing the cost of holding property)” as the main solution. Next, 17.9% (5 respondents) said “eliminating tax blind spots, such as reducing non-taxable benefits for owners of high-priced single homes.” Another 17.9% (5 respondents) supported “strengthening loan regulations for multiple-home owners and blocking financial leverage.”

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