The Return of Property Tax Hikes... Normalizing Transactions and Supply Matters More Than Taxes

Kim Yongbeom, the Presidential Policy Director, recently said that there is a need to rationally adjust property holding taxes and capital gains taxes, warning that funds generated by the recent semiconductor boom could flow into the real estate market. No specific government proposal has been announced yet. However, the mere reappearance of the phrase “normalization of real estate taxation” is enough to make the market worry about the possibility of tax increases.

It is understandable to be cautious about the possibility that increased income from semiconductor exports and improved corporate performance could flow into real estate in some preferred areas. But concern that money could flow into real estate cannot immediately serve as grounds for raising taxes. Policies that attempt to control asset market movements through taxation may suppress buying sentiment in the short term, but in the long term they are likely to produce side effects by blocking transactions and shrinking housing supply.

In particular, simultaneously strengthening holding taxes and capital gains taxes is risky. If the tax burden is increased at the holding stage while heavy taxes are also imposed at the disposal stage, homeowners find it difficult both to continue holding their homes and to put them on the market. This is so-called “taxation with no exit.” When listings dry up, transaction volume declines, but prices in demand-concentrated areas do not necessarily stabilize. Rather, as fewer homes come onto the market, downward price rigidity may increase.

The suspension of heavy capital gains taxation on multi-homeowners already ended last May. Multi-homeowners in regulated areas are once again subject to high surtax rates. With deductions for long-term holding also restricted, the actual tax burden could become even heavier. In this situation, if holding taxes are also uniformly strengthened, those who should be supplying homes to the market are more likely to delay transactions instead.

Real estate taxes should not be a tool to induce or punish taxpayers’ economic activity, but a system for securing fiscal revenue fairly and predictably. It is difficult to build trust in taxation when tax rates and deduction standards are changed whenever housing prices rise, only to be relaxed again when the market slumps. The more taxes become the primary tool of real estate policy, the more people will try to predict the next government’s direction in tax reform before assessing the value of housing itself.

If the “normalization of real estate taxation” is necessary, its direction should be clear. First, the tax burden that directly suppresses transactions, such as acquisition tax and capital gains tax, should be lowered. Reasonable taxation of capital gains is necessary, but the method of adding punitive rates to the basic tax rate solely on the basis of the number of homes owned needs to be reconsidered. The door to transactions must first be opened so that homes can be smoothly supplied to the market and transferred to those who need them.

Holding taxes should be reformed not through sharp tax increases but in a direction that improves simplicity and predictability. The dual structure of property tax and comprehensive real estate holding tax, officially assessed values and fair market value ratios that can change every year, and complicated deductions and caps on tax burdens make it difficult for taxpayers to predict their own burden. The government should present tax rates and assessment standards that can be maintained over the long term, and provide mechanisms such as payment deferrals for elderly people with insufficient income or single-homeowners who have lived in their homes for a long time.

Above all, the issue of real estate prices should be approached as a matter of supply and regulation rather than taxation. Housing should be supplied sufficiently in areas people prefer, barriers to entry in reconstruction, redevelopment, and the private rental market should be lowered, and demand should be dispersed through expansion of transportation networks. If the goal is for funds generated by the semiconductor industry to flow into future industries and startups, then rather than blocking investment destinations through taxes, the government should create a business-friendly environment and attractive investment opportunities.

The government should first be wary of the idea that it can control in detail the flow of funds into particular assets. Even if taxation lowers real estate returns, if the environment for productive investment does not improve, capital will simply move into other unproductive assets or overseas. What channels capital to desired destinations is not taxation, but competitive investment opportunities.

A rational adjustment of the real estate tax system is necessary. But that adjustment should move not in the direction of raising holding taxes and capital gains taxes together, but toward revitalizing transactions and making holding costs predictable. The phrase “normalization of taxation” must not become a euphemism for a tax increase. What is needed now is not taxes that block the market’s exit routes, but tax reform that opens the way for housing to be smoothly supplied and traded.

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Original title: 재등장 부동산 증세론… 세금보다 거래와 공급 정상화가 ...

Author: Gwang yong Go

Date: 2026-06-22

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=1&idx=29195