[10.15 Measures] Excluded This Time, but Policy to Adjust Holding and Transaction Taxes Made Official

In the real estate measures announced on the 15th to curb rising housing prices in Seoul and other regions, the government did not include a real estate tax reform plan that would increase property holding taxes. This decision was made because the new measures already include a significant expansion of highly regulated zones and stricter lending regulations. The government judged that introducing additional tax burdens, just a month after unveiling a housing supply plan, could provoke public backlash. However, it officially announced its intention to revise real estate taxes, such as holding and transaction taxes, over the medium to long term.

Deputy Prime Minister and Minister of Economy and Finance Koo Yoon-chul is presiding over the 'Real Estate Related Ministers Meeting' held at the Government Seoul Office in Jongno-gu, Seoul, on the morning of the 15th. (Source: Ministry of Economy and Finance)

The government, at the Real Estate Related Ministers Meeting presided over by Deputy Prime Minister and Minister of Economy and Finance Koo Yoon-chul, announced these real estate market stabilization measures. Regarding the real estate tax system, the government stated that it would comprehensively consider the market impact and tax fairness when reviewing the specific direction, timing, and sequence of reforms.

In this context, the government also plans to review rationalization measures for holding and transaction taxes, as well as ways to ease demand concentration in specific areas, through research projects and inter-ministerial task forces. In his opening remarks, Deputy Prime Minister Koo stated, "We will prepare rational real estate tax reform measures by comprehensively considering the need to guide capital flows into productive sectors, the principle of ability-to-pay, and public acceptance."

Initially, the government considered increasing the property holding tax burden by raising the fair market value ratio. The fair market value ratio is applied when calculating the tax base for the comprehensive real estate holding tax and property tax. Raising this ratio increases the tax base, thereby increasing the holding tax burden.

The government’s cautious stance on strengthening holding taxes is due to concerns about negative side effects, such as public criticism over increased burdens on middle-class citizens, including elderly retirees who own a single apartment in Seoul. The decision also reflects concerns that, if the government were to introduce additional tax burdens just a month after announcing the September 7 plan to supply 270,000 housing units annually in the Seoul metropolitan area, it could further alienate public sentiment. Kim Woo-cheol, a professor of tax studies at the University of Seoul, pointed out, "If holding taxes are raised without sufficient supply measures, it will only increase the tax burden and provoke dissatisfaction among genuine homebuyers, making it difficult to expect any significant effect on stabilizing housing prices."

There is also the judgment that sensitive tax reforms could increase political risks ahead of the local elections scheduled for early June next year. Most observers expect that demand will be suppressed through lending and transaction restrictions until next year, with tax reforms postponed until after the local elections. At a National Assembly audit the previous day, Deputy Prime Minister Koo explained, "The policy focus is not on suppressing demand through taxes, but on maintaining reasonable prices by increasing supply," adding, "We are not saying we will not use tax policies, but rather that we will use them only as a last resort whenever possible."