Seoul-New York tax gap fuels housing distortions

President Lee Jae-myung on Monday shared a news article on social media platform X titled “Property taxes in major advanced cities compared with South Korea,” adding, “I was curious as well.” Checking property taxes in New York City is straightforward. Anyone can enter an address on the city’s official website to see the tax assessed on a property.

Property taxes in New York vary by housing type, with different assessment bases and rates. Rather than comparing average effective tax rates between Seoul and New York, a clearer comparison can be made by examining similar high-value properties in core areas such as Seoul’s Gangnam, Seocho and Songpa districts and Manhattan.

An 84-square-meter apartment in Raemian One Bailey in Seoul’s Banpo recently sold for 6.08 billion won. According to the New York real estate platform StreetEasy, a condominium in Manhattan’s Upper East Side near Central Park, with four bedrooms and three bathrooms and about 198 square meters of space, is listed at around $4 million, a comparable price. On a per-square-meter basis, the Seoul apartment is roughly twice as expensive. In Midtown on Fifth Avenue, a newly built condominium of similar size, completed in 2023, is also listed at about 6.1 billion won.

The tax burden tells a different story. The owner of the Banpo apartment, assuming a single-home owner, would pay about 28.55 million won this year, including 9.47 million won in property tax and 19.08 million won in comprehensive real estate tax. Although that represents a 56.1 percent increase from a year earlier, it amounts to just 56 percent of the roughly 50.5 million won property tax on the Upper East Side condominium. The Midtown condominium carries a property tax bill of about 54.82 million won. While prices per unit area for high-end apartments in Gangnam have caught up with luxury condominiums in Manhattan, the tax burden remains about half.

Such conditions make highly leveraged home purchases difficult in New York. Even when buyers take on debt, they must maintain sufficient cash flow to cover property taxes and maintenance costs. Mortgage rates are also higher. If home prices rise as they have in New York while taxes remain at current levels, Seoul’s housing market will continue to be seen as a low-risk, high-return investment. The belief that real estate prices always rise is unlikely to fade.

If the government turns to higher holding taxes as a last resort, it will need to present a broader tax reform plan that balances holding and transaction taxes and persuade the public. The gap between Seoul and New York extends beyond tax levels to public perception. In South Korea, property tax and the comprehensive real estate tax are collectively referred to as holding taxes. The latter, introduced in 2005 under the Roh Moo-hyun administration to curb housing prices, is widely viewed as punitive or redistributive, targeting owners of high-value or multiple properties and redistributing revenue to local governments.

In New York City, property tax is a local levy often seen as a fee for public infrastructure and services such as roads, schools, subways and libraries. The city allocates the revenue roughly evenly across social welfare, education, public safety including police and fire services, and transportation and housing. Regardless of whether one owns a single home, multiple properties or rents, it is generally accepted that living in areas with well-developed infrastructure comes with higher costs, much like apartment maintenance fees.

Raising holding taxes without adequate housing supply or effective market oversight risks shifting the burden onto tenants. To prevent this, authorities need systems to track and tax rental income more effectively. Single-person households account for 39.9 percent of all households in Seoul, highlighting the need to address mismatches in housing supply for smaller households. Policy failures that have disrupted housing supply, including growing distrust of villas and officetels following lease fraud cases, underscore the urgency of reform.

South Korea’s jeonse system requires tenants to provide large lump-sum deposits to landlords, yet even basic information on landlords’ tax delinquencies is difficult to access without consent. By contrast, New York real estate platforms list properties with precise addresses, making false listings rare. Entering an address on the city’s website allows users to verify a property’s tax payment history.

As Seoul home prices surged last year, online communities coined the term “Jang Chen landlord,” likening aggressive sellers to a crime boss character in the film “The Outlaws” who demands higher payments. The phrase reflects sellers capitalizing on market anxiety.

Ultimately, the persistence of a seller-driven market reflects policy failure that has allowed the perception to take hold that prices can rise like those in New York while taxes remain at Seoul levels. Addressing structural distortions in the housing market will require not only tax reform but also changes in public perception and transaction systems. Focusing solely on property tax levels in advanced economies will not be enough.