[7·10 Real Estate Measures] Market & Experts: "Tax Burden May Bring Multi-Homeowners' Listings" vs "Taxation Can't Control Housing Prices"

[Asia Economy Reporters Yuri Kim, Donghyun Choi, Onyu Lim] "While multi-homeowners will be targeted, concerns over rising house prices will not be alleviated." Although the government sent a strong message on the 10th through additional measures urging 'only actual residents should buy homes,' experts unanimously expressed uncertainty about whether the ultimate goal of stabilizing house prices will be achieved. In the market, voices are growing that the 'punitive taxation targeting multi-homeowners' may serve as a venting measure but will not ease the anxieties of genuine buyers aiming to purchase their own homes.

Regarding the additional real estate measures announced by Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki on the day, the market and experts collectively stated that 'it is difficult to expect stabilization of the real estate market through tax measures alone.' The government and ruling party said they would raise the comprehensive real estate holding tax rate up to 6% to crack down on speculative forces, but this is expected to increase the burden on multi-homeowners rather than bring immediate house price stability or increase supply. The comprehensive real estate tax is already subject to the current tax law for this year's taxes, as the tax base date (June 1) has passed.

A representative of real estate agency A in Songpa-gu, Seoul, said, "Since the highest comprehensive real estate tax rate has increased from the previous 4% to 6%, multi-homeowners are likely to face a significantly increased holding tax burden," adding, "Ahead of the June 1 holding tax base date this year, there was a flood of quick sales to avoid taxes, so multi-homeowners subject to the highest tax rate will likely consider selling."

However, there are voices that it will be difficult to reach the ultimate goal immediately. Professor Kwon Dae-jung of Myongji University Graduate School of Real Estate pointed out, "Taxation cannot control real estate prices when they are rising." He analyzed, "If taxes are raised without increasing supply, the perception of future supply shortage will cause prices to rise again," and "especially since the increased holding tax will be imposed next year, it will not have a significant immediate impact on the market." Yang Ji-young, director of Yang Ji-young R&C Research Institute, also said, "From the perspective of wealthy multi-homeowners, they will not put their houses on the market just because taxes rise," adding, "They will rather choose to gift their properties."

Ham Young-jin, head of Zigbang Big Data Lab, explained, "Some sales of properties may be possible, but it is highly likely that multi-homeowners will seek exit routes such as gifting during the remaining period until the tax base date next year," adding, "If they choose to hold on, the market will continue to experience a shortage of supply." Yoon Ji-hae, senior researcher at Real Estate 114, forecasted, "The monthly rent market is also unstable, and Seoul subscription rates are showing competition ratios of 100 to 1, indicating a high possibility of market rise in the second half of the year, so even if properties are put on the market, sellers will wait and likely list them in the first half of next year."

Experts agree that to bring many properties onto the market, exit routes such as easing capital gains tax surcharges for multi-homeowners must be provided. However, the government and ruling party have categorically denied this, instead strengthening tax burdens, which has led to criticism that they have abandoned policy flexibility needed to respond to market conditions.

Director Yang said, "The most immediate way to accumulate supply is to lower capital gains tax," adding, "If the capital gains tax surcharge is lifted, properties will come onto the market and stabilization can occur, but raising it instead will only cause the opposite effect of supply shortage." This is because the learned behavior that holding on can yield capital gains has spread. Professor Kwon said, "The government's direction is to raise acquisition and holding taxes," adding, "Instead of strengthening taxes, easing them to induce sales by multi-homeowners is necessary. Exit routes should be opened so that properties can be sold to the homeless, and measures such as capital gains tax reductions should be used to encourage sales."

Some even criticize that the government is using real estate measures to secure insufficient tax revenue. A representative of real estate agency B in Daechi-dong, Seoul, said, "They blocked exit routes for multi-homeowners and then dropped a tax bomb," adding, "They are not stabilizing the market but rather paralyzing normal market functions to control house prices."

Voices were also raised that supply measures must be 'supply desired by demanders' in urban centers such as Seoul. To this end, there are calls for easing redevelopment and reconstruction regulations and increasing floor area ratios in urban areas. Opinions were divided on lifting the Greenbelt, with some advocating partial lifting in already damaged Gangnam areas and others opposing lifting to preserve urban green spaces.

Seo Jin-hyung, president of the Korea Real Estate Society (professor at Gyeongin Women's University), said, "There is not much land in the metropolitan area. Development should occur where demand exists," adding, "Urban redevelopment through redevelopment and reconstruction that increases floor area ratios to build compact buildings is the only way to supply." Professor Kwon emphasized, "Three supply expansion measures are needed: easing redevelopment and reconstruction regulations, relaxing floor limits, and increasing floor area ratios."