“An Already Frozen Housing Market”: Resuming Heavy Capital Gains Tax Will Deepen the Transaction Freeze and Accelerate Gangnam H

Recently, President Lee Jae-myung reaffirmed that the suspension of the heavy capital gains tax on owners of multiple homes will end. This raises concerns that, in an already stalled real estate market, it will only deepen the transaction freeze and further drive up housing prices in Gangnam.

In October 2025, land transaction permit zones and owner-occupancy requirements were added. The government expects these measures to induce listings and stabilize prices, but the real estate market has already lost its ability to function normally. With lending regulations layered on top, both sellers and buyers have been blocked. In such a market, what appears is not price adjustment but the disappearance of transactions.

When the heavy capital gains tax on multiple homeowners is applied, the effective tax rate exceeds 80%. A transaction tax at this level does not encourage sales. Rather, it reinforces the perception that selling means taking a loss, leading owners to hold instead.

This policy stance further entrenches the so-called “one smart home” phenomenon. The more regulations and heavy taxation targeting multiple homeowners are repeated, the more the market responds by reducing the number of homes held. Instead of owning several homes, it becomes rational to concentrate on the single safest one.

The stronger the regulations become, the more rigid downward prices of Gangnam housing become. Heavier capital gains taxes and stronger holding taxes do not increase the number of Gangnam listings. Instead, they only lock up supply. The more taxes are strengthened, the less reason there is to sell a home in Gangnam. It is a natural response for capital to flow into areas with low risk of price declines. Gangnam is an area that meets all of these conditions.

As a result, the price gap between regions widens. A policy that strengthens both holding taxes and transaction taxes at the same time only worsens this concentration. When mobility is blocked, asset holders remain in the most stable areas. This is why policies intended to bring down Gangnam housing prices end up propping them up.

The cost is passed on to end users. When transactions are blocked, it becomes difficult to move homes or trade up. Demand that cannot be absorbed in the home sales market shifts to the jeonse and monthly rental market. When regulations and taxes on rentals are strengthened, supply declines. Jeonse and monthly rent prices inevitably rise.

Major countries abroad avoid this policy mix. The United States has relatively low capital gains tax rates and encourages transactions through long-term holding deductions. The United Kingdom has lowered acquisition tax to promote housing mobility. Germany maintains holding taxes but does not raise transaction tax burdens excessively. France also keeps transaction taxes low to ensure market mobility.

These countries commonly avoid tax systems that block transactions. This is because they recognize that prices adjust only when mobility and resource reallocation are possible. Korea is already a country with a high share of transaction taxes, yet instead of lowering them when it should, it is moving in reverse by raising them.

The Center for Free Enterprise (CFE) believes that the solution to stabilizing the real estate market does not lie in higher taxes. What is needed is the normalization of the transaction structure. To bring down Gangnam housing prices, the incentives driving concentration into Gangnam must be removed. To do so, capital gains tax and acquisition tax should be eased. At a time when new apartment supply has been halted, it must be possible for households to move and trade up so that existing apartments can be supplied quickly to the market.

Regulations should be minimized and limited by region and type. Discussions on holding taxes are also unlikely to be effective unless pursued in parallel with the easing of transaction taxes. If more taxes and regulations are added to a market that has already stopped, only the transaction cliff will deepen and Gangnam housing prices will become even more entrenched.

The cost will be borne by end users, homeless jeonse and monthly rental tenants, and the younger generation. What is needed now is not punitive and penal taxation. This is the time for a policy shift that begins with easing transaction taxes—such as abolishing the heavy capital gains tax on multiple homeowners in line with global standards and easing acquisition tax—so that the market can start moving again.

Gwang yong Go, Policy Director, Center for Free Enterprise (CFE)

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Original title: '이미 멈춰 선 부동산 시장', 양도세 중과 재개로 거래절벽과 강남 집값 상승 가속할 것

Author: Gwang yong Go

Date: 2026-01-29

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=28559