Real estate reform requires consistency, resolve

Home prices in Seoul’s three Gangnam districts of Gangnam, Seocho and Songpa, along with Yongsan District, have fallen after rising for more than 100 consecutive weeks since 2024. The long-held belief that property in Gangnam and Yongsan is immune to downturns has been shaken for the first time in two years. The market appears to be responding to government signals of tougher regulations on multiple-home owners, with listings increasing and prices edging down. Ultimately, stabilizing the real estate market hinges on consistent policy direction and the restoration of market confidence.

After the government decided to end the temporary suspension of heavier capital gains taxes for multiple-home owners on May 9, more owners seeking to avoid a higher tax burden began putting properties on the market. Asking prices for apartments in Gangnam and Yongsan have declined, but transactions remain limited. Many homeowners are closely monitoring conditions and have only slightly trimmed the elevated prices set in the second half of last year, offering buyers little incentive to move. Some real estate-focused YouTubers have further fueled anxiety by warning of a potential “listing freeze” among multiple-home owners after May 10.

President Lee Jae-myung said Thursday, “If holding out proves more advantageous than selling, those who sold will feel deceived and criticize me and the government, while those who held on will mock them.” He added that the government would mobilize all available policy tools to ensure that selling, rather than holding, becomes the more attractive option not only for multiple-home owners but also for single-home owners who hold property for investment or speculative purposes. His remarks signal that even after May 9, authorities intend to encourage both multiple-home owners and investment-oriented single-home owners to list their homes. Lee also put his own apartment in Bundang District, Seongnam, Gyeonggi Province, up for sale that day.

Market observers are already speculating that the government could increase the burden of holding investment properties through tax code revisions in July or raise holding taxes on ultra-high-end homes valued at more than 5 billion won. One option under consideration is reducing the long-term holding deduction for capital gains tax available to single-home owners. The current system grants up to 40 percent each for holding and residency periods, for a combined maximum of 80 percent. The benefit could be restricted to cases of actual residency. President Lee has also indicated that ultra-high-end homes would face burdens and regulations comparable to those in major advanced capital cities, suggesting that holding taxes on high-priced properties may increase.

Although prices in the three Gangnam districts and Yongsan have declined, the remaining 21 districts in Seoul have seen only a moderation in the pace of gains. As the market adjusts to government measures, consistent policy execution, predictable tax rules and a stable housing supply must follow the end of the capital gains tax suspension for multiple-home owners on May 9 and the June 3 local elections. To prevent homeowners who retain properties from passing higher holding tax burdens on to tenants, the government must maintain a stable supply of public rental housing to mitigate potential volatility in the lease market. Only by convincing the market that this time truly is different can authorities achieve durable stability.