"Extension or Reinstatement?" May Deadline for Multiple Homeowners' Capital Gains Tax... Real Estate Supervisory Agency Launch Signals Change [Real Estate AtoZ]

If Not Extended, Maximum Tax Rate for Multiple Homeowners Will Reach 75%
Real Estate Supervisory Agency to Launch Under Prime Minister's Office This Year
Mortgage Loan Risk Weight to Increase... Stricter Lending Criteria
Annual Tax Deduction Limit for Monthly Rent Raised to 10 Million Won
Youth Monthly Rent Support Program to Become Permanent

This year, the real estate system is expected to focus on whether the exclusion of heavy capital gains tax for owners of multiple homes will be extended. In addition, a stricter regulatory system will be implemented to enhance transaction transparency. While the government maintains its stance on managing demand and expanding supply, it plans to strengthen its crackdown on illegal transactions through the newly established Real Estate Supervisory Agency and other measures, with the goal of stabilizing the market.

Capital Gains Tax Relief for Multiple Homeowners Set to Expire in May... Extension Decision Is a Key Issue

Kim Yongsoo, Deputy Minister of the Office for Government Policy Coordination, holding a joint briefing with related ministries on illegal real estate activities last October. Photo by Yonhap News.

The policy most likely to undergo significant change this year is the exclusion of heavy capital gains tax for owners of multiple homes. The regulation that exempts owners of multiple homes in regulated areas from additional capital gains tax is scheduled to expire on May 9. Currently, the basic capital gains tax rate ranges from 6% to 45%. When the heavy tax is applied, owners of two homes face an additional 20 percentage points, and those with three or more homes face an additional 30 percentage points, raising the maximum tax rate to as high as 75%.

Yoon Sumin, Real Estate Specialist at NH Nonghyup Bank, explained, "The heavy capital gains tax for owners of multiple homes in regulated areas has existed since the 1990s, but it became a major issue when the Moon Jae-in administration designated all of Seoul as a regulated area. Since 2022, a temporary exemption has been implemented through revisions to the enforcement decree, and it has been extended annually, now reaching its expiration date."

During the Yoon Suk-yeol administration, the issue of heavy capital gains tax for multiple homeowners was less prominent. This was because all areas except for the three districts in Gangnam and Yongsan District in Seoul were removed from the list of regulated areas, and the exclusion policy continued to be extended. However, under the Lee Jaemyung administration, the October 15 measures designated all of Seoul and 12 regions in Gyeonggi Province as regulated areas, and with the exclusion policy set to end in May this year, the issue has resurfaced. While most in the market expect the exemption to be extended, if the government decides not to do so, there is a strong possibility that owners of multiple homes will rush to sell their properties before May to avoid a 'tax bomb.'

Transaction Reporting Under Close Scrutiny... Expanded Support for the Homeless and Youth

The transaction management system to prevent market disruptions will also be significantly strengthened. When licensed real estate agents report home sales contracts, they will be required to submit both the contract and proof of deposit for the down payment. The format for the funding plan will also be further detailed, requiring the direct listing of financial institution names. In particular, for home transactions within land transaction permit zones, submission of supporting documents will be mandatory, enabling a thorough verification of funding sources. From February, additional anti-speculation measures will be implemented for foreign homebuyers, requiring them to report their visa status, domestic address, and proof of residence in Korea for more than 183 days when acquiring property in land transaction permit zones.

Support measures for genuine homebuyers will be expanded. The annual tax deduction limit for monthly rent will be raised to 10 million won. Households with no homeownership, including weekend couples, will be able to combine their deductions. In addition, support for the Bogeumjari Jeonse loan will be expanded for both tenants and owners relocating from reconstruction sites. The youth monthly rent support program, which has been operated temporarily since 2022, will become permanent, continuously easing the housing cost burden for young people.

There will also be changes in the financial sector. The minimum risk weight for mortgage loans at banks will be raised early from 15% to 20%, making loan screening more stringent. Yoon analyzed, "This is a measure to increase banks' risk weight ratios and encourage corporate lending instead of mortgage lending, which will ultimately raise overall mortgage rates and reduce the total volume of such loans."

Comprehensive pressure on market-disrupting activities is expected to intensify. A Real Estate Supervisory Agency (tentative name) under the Prime Minister's Office, which will have the authority to directly investigate illegal activities in the real estate market-including special judicial police-will be established within the year. It will be a permanent organization that monitors the market in real time, and the government is considering establishing a body of at least 100 personnel, similar to the Tax Tribunal.