Real Estate Tax Reform: Shift to Value-Based Assessment and Its Market Impact

The government is strongly considering a shift in the comprehensive real estate holding tax criteria from the current 'number of houses' to 'total property value'. This move aims to resolve equity issues where tax burdens varied significantly based on the number of homes owned despite having the same asset value. A detailed tax reform plan is expected to be announced by the end of July.

Key Background and Market Impact of the Tax Reform

Transitioning to Value-Based Assessment

Under the current system, multiple-home owners face much higher punitive tax rates than single-home owners. This has led to an inversion where someone owning several low-priced regional homes pays more tax than someone owning a single luxury apartment in Seoul. If reformed to a value-based system, the tax burden on multiple-home owners will ease, potentially cooling down the 'one smart house' phenomenon (preference for high-end apartments in core Seoul areas) driven by tax avoidance.

Restructuring Tax Benefits Around Actual Residence

Furthermore, tax deductions for single-home owners are expected to be restructured based on 'actual residence periods' rather than simple ownership duration. This reflects the government's intention to curb speculative demand by reducing benefits for ultra-high-priced homes where the owner does not actually reside.

FAQ on Real Estate Tax Reform

• Q. When will the finalized tax reform plan be released?
  Following additional discussions at the 'Grand Real Estate Debate' presided over by the President on July 23, the Ministry of Economy and Finance will announce the final tax law amendment by late July.
• Q. What happens to taxes for owners of ultra-high-priced single homes?
  Targeted tax increases, such as raising effective tax rates or reducing deduction rates for homes valued over 4-5 billion won, are being discussed. Therefore, holding tax burdens for these owners may actually increase.
• Q. How will this affect the overall real estate market?
  Reducing punitive taxes on multiple-home owners could revive buying sentiment and boost transactions in regional and mid-to-low-priced housing markets. However, there are also concerns about a temporary lock-in effect as market participants adopt a wait-and-see approach ahead of abrupt tax changes.