July Real Estate Policy Announcement Imminent: Key Reforms in Property and Acquisition Taxes

Tension in the housing market is escalating as the government announces a comprehensive overhaul of real estate taxes scheduled for later this month. Discussions are currently underway to balance property holding taxes and transaction taxes, including the comprehensive real estate holding tax and capital gains tax. This is expected to be a major variable in the real estate market in the second half of the year.

Resident-Focused Tax Reform: What are the Core Details?

The most significant feature of this proposed reform is the government's intention to redefine housing as a 'living space' rather than an 'investment asset'. The Ministry of Economy and Finance and related departments are heavily considering increasing the property tax burden on multiple-home owners and non-residents, while easing transaction taxes, such as capital gains tax, to stimulate housing transactions.

• Adjustments to Holding Taxes: Measures such as adjusting the tax base brackets and raising the fair market value ratio are being discussed to normalize excessive tax burdens and ensure equity.
• Capital Gains Tax Reform: The special deduction for long-term holding for single-home owners is planned to be restructured from simple holding periods to actual residence periods, strengthening tax benefits for end-users.

These policy changes are expected to create an 'exit strategy' that encourages properties to enter the market and stimulates transactions, while simultaneously pressuring multiple-home owners to sell off properties to reduce their tax burden.

Will the Preference for a 'Single Premium Home' Intensify?

Market experts predict that this tax reform will further crystallize the trend of concentrating on a 'single premium home' (Ttolttolhan Han Chae) in prime locations with solid demand. Under the circumstances where tax burdens on multiple homes are maintained or strengthened, demand to dispose of properties in suburban areas and upgrade to high-quality housing in core locations may surge by utilizing the relaxed capital gains tax. In particular, coupled with recent concerns over a 'supply cliff' due to decreased apartment building permits in the metropolitan area, this could strongly stimulate buying sentiment for apartments in key regions.

FAQ: Key Questions Regarding the Comprehensive Real Estate Policy

Q1. Is there a possibility of abolishing the comprehensive real estate holding tax entirely?

A1. Rather than a complete abolition, the focus is on mitigating and rationalizing punitive taxation, such as lowering tax rates, abolishing the heavy taxation on multiple-home owners, or raising the taxation threshold (e.g., from the current 1.2 billion won to 1.5 billion won).

Q2. What impact will this policy have on the Jeonse (lease) market?

A2. If actual residence requirements are strengthened, there is a concern that landlords may increasingly evict tenants to move in themselves, which could act as an upward pressure on Jeonse prices due to a short-term decrease in Jeonse listings.

Q3. When is the specific announcement date?

A3. The Ministry of Economy and Finance plans to announce the specific details in the tax law revision bill at the end of this month (late July), after undergoing procedures to gather opinions from experts and the public through forums.