Deep Dive into the 2026 Real Estate Tax Reform: Shift to Residence-Based Taxation and Market Impact

Core Values of the 2026 Real Estate Tax Reform: Residence and Property Value

The tax reform plan announced by the government on August 3, 2026, aims to fundamentally shift the real estate taxation system from being based on the "number of properties owned" to criteria centered on "actual residence" and "property value." This is interpreted as a measure to acknowledge the limitations of punitive taxation on multiple-home owners, protect single-home owners who reside in their properties, and establish a rational tax base proportional to asset value. Particularly in light of recent concerns over a shortage of apartment supply in Seoul and the metropolitan area, the effectiveness of the tax system in stabilizing the market has emerged as a key issue.

Comprehensive Real Estate Holding Tax: The 1.4 Billion Won Threshold and Differential Deductions

The most notable aspect of this reform is the dualization of the Comprehensive Real Estate Holding Tax threshold. Even for single-home households, the basic deduction limit varies significantly depending on their actual residence status, which is a paradigm-shifting change in property ownership.

• Resident Single-Home Owners: The holding tax is levied only when the assessed value exceeds 1.4 billion won (approximately 2 billion won in market value). This is a substantial upward adjustment from the previous threshold, which is highly likely to entrench the "flight to quality" phenomenon—preferring a single, high-value asset in core areas.
• Non-Resident Single-Home Owners: Properties become subject to the holding tax starting from an assessed value exceeding 900 million won. This demonstrates a strong policy intent to exert deterrence through taxation on investment-purpose asset holdings, such as gap investments, without actual residence.

Furthermore, starting in 2028, a single tax rate table based on property value will be fully introduced regardless of the number of homes owned, and the fair market value ratio will be readjusted to a baseline of 70%. However, an 80% ratio will apply to those owning three or more homes and to assets in regulated areas, indicating that the reduction in the tax burden for multiple-home owners will remain somewhat limited.

Capital Gains Tax Reform: Shifting Benefits from Holding Period to Residence Period

The capital gains tax system has also been restructured to provide strong incentives for the "period of actual residence" rather than mere "holding period." Linking the taxation of capital gains with actual residential utility is a meaningful step forward that aligns with core taxation principles.

Tenfold Increase in Basic Deduction and Relocation Relief for Seniors

The most unprecedented measure is the tenfold expansion of the basic capital gains deduction for single-home households who have resided in their property for 10 years or more (with a transfer value of 3 billion won or less), increasing it from the current 2.5 million won per year to 25 million won per year. This is a sophisticated design to minimize tax friction and restore the housing ladder when long-term residents move to better residential environments.

Additionally, a new system grants up to a 50% capital gains tax reduction (capped at 500 million won) for single-home owners aged 65 or older who sell their metropolitan homes and relocate to non-metropolitan regions. This is part of a macroeconomic policy aiming to disperse the population and capital concentrated in the metropolitan area while supporting the asset liquefaction of the elderly to invigorate the broader economy.

Temporary Easing of Heavy Taxation on Multiple-Home Owners to Induce Market Supply

The heavy capital gains taxation on multiple-home owners for properties within regulated areas will be temporarily suspended for two years, from 2027 to 2028. This is a desperate measure to alleviate short-term market supply shortage concerns caused by the aftermath of recent jeonse (deposit) fraud and a decrease in apartment building permits. The policy calculation is that if properties held back by punitive taxes are released onto the market, it can contribute to price stabilization to some extent.

Market Implications and Future Political Issues

While the 2026 tax reform proposal receives positive evaluations for bringing the tax base to reality and enhancing tax equity, it concurrently carries deep concerns about exacerbating instability in the rental market. In particular, the strengthened holding tax on non-resident single-home owners could act as a strong incentive for landlords to pass their increased tax burden onto tenants through higher jeonse deposits or conversion to monthly rent.

Fierce debates are currently ongoing in the political arena between the ruling and opposition parties over expanding the scope of exceptions (such as schooling, job changes, family care, etc.) for the strengthened actual residence requirements. The opposition party, considering potential tax resistance, is strongly demanding amendments, such as raising the tax exemption threshold for single-home owners to 1.5 billion won, foreshadowing severe growing pains during the National Assembly's review process at the end of the year. Real estate market participants must closely monitor whether the government adheres to its original plan and the National Assembly's final legislative outcome to identify the optimal timing for restructuring their asset portfolios.