[How Is Your Dream?] Disappointment of Homeowners... "Only Taxes Have Increased"

2021 New Year Project - ① Real Estate as Desire or Frustration

Even Homeowners Struggle in the Volatile Real Estate Market
Indiscriminate House Price Increases Raise the Ladder for Housing Upgrades
Owning One House but Facing Soaring Taxes... Even Outskirts Must Pay Comprehensive Real Estate Tax

The real estate issue shook South Korea in 2020. Contrary to President Moon Jae-in's confident declarations about having control over the real estate problem, it was a year marked by growing public frustration over homeownership. The government announced 24 policies to curb the volatile housing prices, but each time, prices rose even further. Guryong Village, the last shantytown in the Gangnam area of Seoul, stands in stark contrast to the dazzling high-rise apartments. In the New Year of the Year of the Ox, there is hope for stabilization in the housing market. Photo by Moon Honam munonam@

[Asia Economy Reporter Lee Chun-hee] With soaring house prices, are homeowners truly happy? Unfortunately, the answer for many homeowners is no. The reason is simple: it’s not just their own home’s value that has increased. Unlike other assets, real estate is an essential asset for living. The indiscriminate rise in housing prices across regions means that, except for some high-priced homeowners in areas like Gangnam in Seoul, ultimately no one gains happiness, which is why this criticism arises.

Kim (59), a self-employed person who has lived in the same apartment for 15 years, recently considered "trading up" as new apartments were being built through redevelopment in the surrounding neighborhood, but soon gave up the idea. He said, "Since I bought this house, its price has nearly tripled," but added, "However, apartments of similar grade nearby have all increased by the same amount, and the new apartments have gone up by several hundred million won more," lamenting that nothing has really changed. With the COVID-19 pandemic making it difficult to even run his business, taking out a loan is out of the question.

As the government broadly raised property taxes, the burden on homeowners has increased further. The government insists that the rationale for raising property taxes is to curb speculation by multi-homeowners rather than single-homeowners, but in reality, the benefits of reduced property tax rates are limited to homes with official prices under 600 million won.

Moreover, as the government maintains its official price roadmap reflecting up to 90% of the soaring house prices, even single-homeowners inevitably face increased tax burdens, and the number of households subject to the comprehensive real estate holding tax, often called the "wealth tax," is expected to rise. Industry experts predict that from this year, households subject to the comprehensive real estate tax will be added in Dongdaemun-gu, Seoul, where there were none until last year, and that from around 2023, multi-unit housing subject to the tax will be added in rapidly rising areas such as Gangbuk, Dobong, Nowon, Geumcheon, and Gwanak districts.

Especially unlike other assets such as stocks, which can be sold and exited from the market at any time, the real estate market is essentially impossible to escape, which deepens their concerns. Due to the nature of residential space, even if they sell their home and become homeless, they must remain in the market as tenants. While multi-homeowners can sell their burdensome properties at will, single-homeowners have almost no choice.

Adding to this, the government's and ruling party’s reckless enactment of the "Three Lease Laws" has shaken the rental market, causing homeowners to suffer deep worries. Tenants, facing soaring rents and difficulty finding new places to move, have been making unreasonable demands by threatening to exercise their right to renew leases, while cases of people who had no plans to move being suddenly forced out to other homes have surged.

Jang (51), who was living in a Jeonse lease in Mok-dong for the education of her middle school child, recently had to move unexpectedly. When her contract expired last month, she agreed to raise her Jeonse deposit by 500 million won as requested by the landlord, but the landlord rejected the offer. The landlord, who had been living in the apartment on a Jeonse lease, suddenly lost their place when the apartment was sold to a buyer for actual residence and decided to move in to meet the occupancy requirements for reconstruction apartments. Although Jang owns a home, the contract periods did not align, and worried about her child’s education, she had to find another Jeonse home at a price 300 million won higher than before.

On real estate communities, sarcastic comments began to pour in, saying, "The government is creating unnecessary moves," calling it a "true creative economy." Adding to this, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, who is the control tower of real estate policy, became a laughingstock when it was revealed that he paid tenants a gratuity to vacate their homes after their exercise of the lease renewal right made selling houses difficult.