[Inside Chodong] Clues to Real Estate Policy Revealed Through the President's Words and Actions

Policy Focused on Preventing Household Assets from Concentrating in Real Estate
Uniform Loan Restrictions to Encourage Asset Diversification
Uncertainty Looms over Potential Tax Reform

Perhaps because it is still early in his term and due to his diligent work style, the president's words and actions have been under the spotlight. Regarding real estate policies, which have drawn significant public attention, the president recently dropped a hint during a press conference, referring to the "600 million won loan regulation" as merely a "preview." This may reflect an awareness of previous criticisms about strategic ambiguity. It suggests that the authorities' stance of reviewing all feasible measures is not just a bluff.

The president also praised the official who devised the current policy, which imposes a blanket restriction on mortgage loans rather than targeting specific regions or groups with pinpoint regulations. It appears that the president believes the most urgent priority is to break the vicious cycle in which increased liquidity flows into apartments, driving up prices and further expanding household debt.

The president has maintained the view, since his candidacy, that a significant portion of household assets is tied up in real estate, which is difficult to liquidate, thereby entrenching domestic economic stagnation. Measures to prevent market liquidity from concentrating in specific assets?particularly those symbolized by Gangnam apartments?are likely to remain in place for the time being.

In this context, the president's campaign remark that "housing prices will not be controlled through taxation" is a topic worth revisiting. Every administration has aimed to manage housing prices in a stable manner. The government is not pleased with sharp fluctuations, whether prices rise or fall. However, unlike during the first phase of new towns, it is now difficult to stabilize the market simply by flooding it with new supply. The effectiveness of such policies is limited, and they could even move the market in the opposite direction of the government’s intentions. If taxes can influence housing prices, there would be no reason not to adjust the tax system.

It is unclear exactly which taxes the president was referring to. Considering both internal and external factors, it is likely to involve holding taxes such as the comprehensive real estate tax. The comprehensive real estate tax has experienced significant fluctuations depending on the administration. Governments have either strengthened or weakened it according to the preferences of their support base. While some criticize it as punitive or double taxation, civil society organizations and some within the ruling party argue that, since land is a public resource, those who privately own it should bear a certain level of burden. Since the system was not originally designed to stabilize housing prices, there have been calls to revise the tax regime to restore normal market function. In the basic society advocated by the new administration, it is unlikely that asset inequality based on real estate, which leads to inequality of opportunity, will be left unaddressed.

The ruling party has also left room for tax reform. Representative Jin Sungjun, who leads the party’s policy committee, recently stated on the radio that tax reform could be used as a last resort. He said that if the market faces a serious situation, it is pragmatic to consider any available option. If the National Assembly moves to revise real estate taxes, the government is likely to comply without objection. President Lee Jaemyung has previously clarified the division of roles among the party, the administration, and the presidential office. He has stated that if the National Assembly establishes appropriate rules, he will follow them as the head of the executive branch. He also added that appointed ministers should respect the elected legislature. While these remarks may be made confidently thanks to the current political landscape, it is fundamentally true that the National Assembly is the legislative body and the government is an organization that implements laws passed by the legislature.

The new administration has decided to tighten real estate loans while seeking to invigorate other investment channels such as stocks. Will wealthy real estate holders move their funds elsewhere in response to this direction? For now, the prevailing sentiment is to wait and see. Many believe that if the administration changes again in five years, a new phase will unfold. In many ways, it is not an easy task.