Lee Jae-myung Urges Caution on Real Estate Taxation... Will Revising the Special Long-term Holding Deduction Shake the 'Single High-value Home' Trend? [Real Estate AtoZ]

"Single-Home Owners to Be Protected,"
But Reforms Likely to Raise Capital Gains Taxes
High Possibility of Adjusting Criteria and Rates for the Special Long-Term Holding Deduction
Suspension of Capital Gains Tax Surcharge for Multiple-Home Owners May End

On the previous day, January 21, President Lee Jae-myung stated, "We will postpone the use of real estate tax regulation measures as much as possible." However, market analysts believe that the administration may still move to revise policies that underlie the preference for owning a single high-value property. Measures being discussed include adjusting the ratio for the special long-term holding 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.

On the 21st, citizens are watching the live broadcast of President Lee Jae-myung's New Year's press conference in the waiting room of Seoul Station, Yongsan-gu, Seoul. 2026.01.21 Photo by Yoon Dongju

The main concern in the market stems from President Lee's comment that "single-home owners are to be protected," but also that "if situations arise that cross the line and become social problems, we must of course utilize tax policy measures." This, combined with Policy Chief Kim Yongbeom's earlier statement that the capital gains tax brackets for high-value single-home owners should be further subdivided, has sparked fears that even owners of expensive single homes may become targets of real estate tax regulations.

Experts interpret President Lee's remarks as a guideline indicating there will be no sharp increase in property holding taxes, but they also see a strong possibility of reforms that would effectively raise capital gains taxes. By revising the criteria for the special long-term holding deduction to reduce tax breaks on capital gains from high-value homes and by not extending the suspension of the capital gains tax surcharge for multiple-home owners, the administration is likely to encourage these owners to put their properties on the market.

The special long-term holding deduction has been considered a major tax benefit for owners of high-value properties in areas like Gangnam. To qualify, both the holding period and actual residence period requirements must be met, and the deduction rate varies according to the duration of ownership and residence for single-home households. After five years, the deduction rate is 40% (20% each for holding and residence), and after more than ten years, it rises to 80% (40% each for holding and residence).

The Democratic Party of Korea reportedly considered adjusting the deduction rates by property value in its 2021 tax reform proposal. The plan would have set the deduction rate at 10% for capital gains exceeding 2 billion won, 20% for gains between 1 billion and 2 billion won, 30% for gains between 500 million and 1 billion won, and 40% for gains of 500 million won or less. However, the proposal was criticized as an excessive capital gains tax hike and did not pass the National Assembly.

Yonhap News Agency

Experts believe that, since the special long-term holding deduction has reinforced the preference for owning a single high-value property, there is a strong likelihood of reform. Jung Taeksu, Head of the National Real Estate Policy Project Team at Citizens' Coalition for Economic Justice, pointed out, "There is a deeply entrenched perception that single-home owners are simply end-users who need protection, but in reality, the special long-term holding deduction has fueled demand for single homes in Gangnam and encouraged speculation. There needs to be social debate and institutional reform to ensure fair taxation of unearned income."

Chae Sangwook, CEO of Connected Ground and a real estate analyst, explained, "The special long-term holding deduction was increased from 30% to 80% during the Lee Myung-bak administration, and it is abnormal for it to remain at this 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 phenomenon of concentrating on a single high-value property, and I expect that the President's remarks will lead to policy reform."

However, some experts warn that tax reform could result in a decrease in properties available for sale. Kim Hyosun, Chief Real Estate Specialist at KB Kookmin Bank, noted, "Even if the holding and residence requirements are met, if tax benefits are reduced, the number of properties for sale in high-value areas like Gangnam and along the Han River could decrease."

There are also concerns that the temporary suspension of the capital gains tax surcharge for multiple-home owners, which expires on May 9, may not be extended. Yoon Sumin, Real Estate Specialist at NH Nonghyup Bank, commented, "It would not be difficult to simply let the suspension expire, and this would likely have been considered to encourage multiple-home owners to put their properties on the market. While this would be a burden for them, it could also result in an even greater decrease in supply."

CEO Chae Sangwook added, "We need to wait and see the government's tax reform proposal, but I expect the temporary suspension of the capital gains tax surcharge in regulated areas of the Seoul metropolitan area to end this time."

Ham Youngjin, Head of Real Estate Research Lab at Woori Bank, explained, "If the special long-term holding deduction benefit is reduced from 80% to 50%, it could become a burden for retired seniors, and some two-home owners may choose to transfer ownership to their children. While the intention is to signal multiple-home owners to put their properties on the market, some may decide not to sell if they believe prices will rise further."