[Capital Gains Tax Hike Resumes After 4 Years] Experts Split on Home Price Outlook: 39% See Decline vs. 32% Expect Rise

Regarding home price forecasts for the year following the reinstatement of the capital gains tax surcharge on May 10, market experts mainly predicted a decline. According to a survey conducted by The Asia Business Daily from April 1 to April 10 with 28 real estate professionals and certified agents, 39% (11 respondents: 9 predicting a moderate drop and 2 expecting a sharp decline) answered that prices would fall. However, 32% (8 for moderate increase, 1 for sharp increase) still anticipated a rise in prices, while 25% (7 respondents) believed there would be little impact.

The primary reason for the higher likelihood of a price decline is the belief that stringent lending restrictions will effectively block liquidity from flowing into the housing market. Additionally, with expectations that the restructuring of real estate taxation will take shape only after the local elections in June, most experts do not see much chance of uncertainty being resolved in the near future. Conversely, those predicting a price increase pointed to the persistent supply shortages in major areas of Seoul and the surrounding metropolitan region, which are unlikely to be addressed in the short term.

A notice regarding capital gains tax is posted at a real estate brokerage office in downtown Seoul. Yonhap News

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Nearly half (46%) of respondents believed that there would be a surge of so-called "urgent bargain listings" as homeowners try to quickly offload properties-even at reduced prices-up until the end of the capital gains tax surcharge deferral on May 9. While some noted that many discounted properties have already been sold since the government announced in February that the grace period would end, there is still potential for a spike in last-minute transactions.

With the government now extending the capital gains tax surcharge deferral for multi-homeowners to include all land transaction permit applications submitted by May 9, those considering selling have gained some breathing room. In land transaction permit zones (referred to as "Toheoguyeok"), prior approval from the local government is required before selling an apartment, a process that typically takes two to three weeks. Recently, local district offices have been flooded with applications, raising concerns that some transactions might not be completed in time.

However, after the new capital gains tax rules for multiple homeowners come into effect on May 10, 55% of respondents expect a deepening supply squeeze, with fewer properties coming onto the market. The capital gains tax rates range from 6% to 45%, but owners with two homes face an additional 20 percentage points, and those with three or more homes face an extra 30 percentage points. Including local taxes, the tax burden can reach up to 82.5%, likely deterring many from selling. There are variables, however. Some respondents noted that, as President Lee Jaemyung has pledged, if the property holding tax is revised and the tax burden increases, or if financial authorities refuse to extend the maturity of loans for landlords, the situation could change. Additionally, 64% saw the tax surcharge as a factor destabilizing the rental market, either by reducing available listings or leading landlords to pass on the higher tax to tenants through increased rents.

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While opinions are divided on the post-surcharge market outlook, there is broad consensus that frequent policy changes depending on the administration are a negative. Both the imposition and suspension of the capital gains tax surcharge for multiple homeowners in designated regulation zones were decisions made under the previous Moon Jae-in and Yoon Suk-yeol administrations.

On the question of whether policy variability undermines market efficiency, 86% said yes (12 said "significantly undermines," 12 said "somewhat undermines"). Respondents argued that the loss of trust in government policy fuels market anxiety, reduces predictability, and distorts the market. Since property makes up a large portion of household assets, the seesawing of policies with each change in administration makes it impossible for market participants to anticipate what will happen. Only 7% believed that such variability does not undermine efficiency.

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Furthermore, 68% of respondents criticized the capital gains tax deferral over the past four years for entrenching asset polarization. They said the policy favored wealthy asset holders, giving them opportunities for tax savings and asset restructuring. Only 18% disagreed with the notion that the temporary measure for market normalization effectively solidified polarization.

Regarding President Lee's criticism that the benefits for multiple homeowners have been excessive, 61% agreed, while 36% disagreed. While some believe that unearned real estate income undermines social trust and motivation to work, others argued that the measures were appropriate for market conditions or contributed to stability in the rental market by encouraging more listings.

Experts and field agents emphasized the need for a long-term approach, rather than piecemeal responses to changing market conditions. With the reinstatement of the capital gains tax surcharge bringing increased public attention to property taxation, they stressed the importance of designing the system in a way that the majority of society can accept.

Woobyeongtak, Senior Specialist at Shinhan Premier Pathfinder, said, "While the reinstatement of the surcharge has had the positive effect of prompting urgent listings in high-priced areas, the government must now ensure ongoing stability, which requires reaching consensus among stakeholders. Structural reform and social agreement are needed, not just short-term emergency measures."

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Yoon Jihae, Head of Research Lab at Real Estate R114, proposed, "We need to swiftly initiate comprehensive discussions to build social consensus on both holding and transaction taxes." Kim Eunsun, Head of Big Data Lab at Zigbang, said, "If policy direction remains consistent and trust is built, market participants will begin to recognize that 'this time is different,' and the previously entrenched attitude of holding out or rushing to buy will gradually ease."

There were also concrete policy suggestions. Han Mundo, Professor at Seoul Digital University, stated, "For public land, housing prices should be set based on development costs, and for private land, price ceilings should be enforced throughout the metropolitan area. Policies to abolish or reduce the scale of jeonse loans are also necessary."

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