Lee Jaemyung Urges Caution on Real Estate Taxation... Will Revising the Special Long-Term Deduction Shake Up the 'Smart Single Property' Trend? [Real Estate AtoZ]

Targeted Regulations for High-Value Homes Aimed at the 'Smart Single Property' Phenomenon
High Likelihood of Adjusting Criteria and Rates for the Special Long-Term Ownership Deduction
Possibility of Ending the Suspension of the Capital Gains Tax Surcharge for Multiple Home Owners

President Lee Jaemyung has stated his intention to delay implementing real estate tax regulations as much as possible, but there is analysis suggesting that he may move to revise the systems underpinning the preference for owning a single high-value property. Options being discussed include adjusting the rate of the special long-term ownership deduction and not extending the temporary suspension of the capital gains tax surcharge for owners of multiple homes, which is set to expire in May.

During a New Year's press conference on January 21, President Lee said, "At this point, I am not seriously considering using the tax system as a real estate policy tool," but added, "If the situation crosses a line and becomes a social issue, it is only natural to mobilize tax measures."

Yonhap News Agency

Experts interpret President Lee's remarks as providing a guideline that there will be no sharp increase in holding taxes. The Lee administration, which believes that the preference for a "smart single property" is driving up apartment prices, is seen as signaling the start of tax reforms targeting owners of high-value homes. There is a strong possibility that the government will revise the criteria for the special long-term ownership deduction to reduce capital gains tax benefits for expensive homes, and that it will not extend the temporary suspension of the capital gains tax surcharge for multiple home owners, thereby encouraging more listings from these owners to enter the market.

Potential Revision of the Special Long-Term Ownership Deduction, the Basis of the 'Smart Single Property' Preference

The special long-term ownership deduction has been considered a tax-saving benefit for owners of high-value homes in areas like Gangnam, so the market is closely watching the direction of its reform. Recently, Kim Yongbeom, Chief Presidential Policy Secretary, expressed the view that the capital gains tax brackets for "smart single property" owners should be further subdivided. The special long-term ownership deduction for capital gains tax is a system that deducts a certain amount of capital gains tax depending on how long the property has been held. Both the holding period and the actual residency period requirements must be met. For single-home owners who have lived in their property for more than 10 years, the deduction rate is 80%.

When preparing its tax reform proposal in 2021, the Democratic Party under the Moon Jaein administration reportedly considered adjusting the special long-term ownership deduction by price brackets. The proposed deduction rates were 10% for capital gains exceeding 2 billion won, 20% for gains over 1 billion won up to 2 billion won, 30% for gains over 500 million won up to 1 billion won, and 40% for gains up to 500 million won. However, this proposal was criticized as a capital gains tax hike and did not pass the National Assembly.

Experts believe that, since the special long-term ownership deduction has reinforced the preference for "smart single property" ownership, the likelihood of reform is high. However, there are also opinions that tax reform could reduce the number of properties listed for sale.

Kim Hyosun, Chief Real Estate Specialist at KB Kookmin Bank, said, "The special long-term ownership deduction is virtually the only means to manage capital gains tax through the holding period, and the perceived benefit is particularly significant for owners of high-value or multiple homes. Even if the holding and residency requirements are met, if the tax benefits are reduced, the number of properties listed for sale in high-value areas such as Gangnam and along the Han River may decrease."

Jung Taeksu, Head of the National Real Estate Policy Project Team at the Citizens' Coalition for Economic Justice, pointed out, "There is a fixed perception that single-home owners are 'genuine end-users who need protection,' but in reality, the special long-term ownership deduction has increased the preference for owning a single home in Gangnam and has encouraged speculation. There needs to be social discussion and institutional reform to ensure fair taxation of unearned income."

Chae Sangwook, CEO of Connected Ground, explained, "The special long-term ownership deduction was increased from 30% to 80% during the Lee Myungbak administration, and it is abnormal for it to remain at that level even though we are not facing a crisis like the Lehman Brothers collapse. Reducing the deduction is one of the fundamental solutions to the 'smart single property' phenomenon, and I believe the President's remarks will serve as a catalyst for institutional reform."

Possibility of Ending the Suspension of the Capital Gains Tax Surcharge for Multiple Home Owners

Yonhap News Agency

The suspension of the capital gains tax surcharge for multiple home owners, which is set to expire on May 9, is likely to end without further extension.

Yoon Sumin, Real Estate Specialist at NH Nonghyup Bank, said, "Since the suspension of the capital gains tax surcharge for multiple home owners can simply not be extended, it can be implemented without much difficulty. The government likely considered that more properties from multiple home owners would be listed, which could be a burden for them, but there is also a risk that the number of listings could decrease even further."

Chae Sangwook, CEO of Connected Ground, stated, "We need to wait and see the government's tax reform proposal, but since the Ministry of Economy and Finance announced in its 2026 Economic Growth Strategy that areas with declining populations will be excluded from the capital gains tax surcharge, it appears that the suspension for regulated areas in the Seoul metropolitan area will end this time."

Ham Youngjin, Head of Real Estate Research Lab at Woori Bank, explained, "If the benefit of the special long-term ownership deduction is reduced from 80% to 50%, it could become a burden for retirees and the elderly. Some owners of two homes may choose to gift properties to their children. The intention is to send a signal for multiple home owners to list their properties, but there may also be people who choose not to sell, believing that prices will continue to rise."