South Korean President Lee Jae-myung stated at a real estate policy forum on the 23rd that property holding taxes must be raised at least 3-fold to reach developed country levels, with progressive rates targeting ultra-high-value homes and multiple-property owners while providing relief for primary residences. Following the government's designation of Hwaseong Dongtan-gu, Yongin Giheung-gu, and Guri City as regulated areas from the 1st and as land transaction permit zones from the 5th, adjacent unregulated areas have experienced rapid housing price increases, with specific properties in Namyangju Dasan-dong rising 100 million won in one month to 1.078 billion won. The government is simultaneously discussing temporary capital gains tax relief to provide an exit path for multi-property owners to dispose of holdings. This policy package forms part of ongoing efforts to stabilize housing markets while addressing speculative investment, as major banks have raised deposit rates to around 3.2% and mortgage rates now range from 4.82% to 7.55% as of the 23rd.
Lee Jae-myung Proposes 3-Fold Property Holding Tax Increase at Forum
Lee Jae-myung announced at the real estate policy forum on the 23rd that domestic property holding taxes must be raised at least 3-fold to align with developed country standards. The government is examining a progressive differential structure rather than uniform increases across all properties, using single-home ownership with appropriate holding costs as the baseline. The proposal applies weighted rates to ultra-high-value homes, luxury properties, multiple-property ownership, and speculative holdings. Expert recommendations presented at the forum suggested setting 1 billion won—double the national average apartment price of 500 million won—as the threshold for ultra-high-value homes. Participants also proposed converting the comprehensive real estate tax assessment basis from the current property count system to a holdings-value-centered approach. The forum discussed reducing or abolishing the current tax credit for single-home owners with long-term ownership and elderly owners, which currently reaches a maximum of 80%.
Namyangju and Hwaseong Unregulated Areas Record Price Surges Following Regulatory Expansion
Since Hwaseong Dongtan-gu, Yongin Giheung-gu, and Guri City were designated as speculative overheating zones and adjustment target areas from the 1st, and as land transaction permit zones from the 5th, purchase demand has rapidly shifted to adjacent unregulated areas. A 84㎡ unit at Dasan Yuseung Hannaedeul Central in Namyangju Dasan-dong transacted at 1.078 billion won, up 100 million won in one month and marking a new high. A 84㎡ unit at Byeongjeom Station I'Park Castle in Hwaseong Byeongjeom-dong sold for 855 million won, up more than 70 million won in less than one month. In contrast, Hwaseong Dongtan-gu, which was incorporated into the regulated area, saw its weekly price increase rate sharply decelerate from 1.29% to 0.25%. A Woori Bank real estate researcher analyzed that actual buyers' purchases of lower-priced properties are continuing in adjacent areas that share living zones with regulated regions.
Government Discusses Temporary Capital Gains Tax Relief for Multi-Property Owners
Lee Jae-myung stated that while strengthening property holding taxes, the government must simultaneously prepare an exit path allowing multi-property owners to dispose of properties. The government already terminated the capital gains tax surcharge suspension for multi-property owners on May 9 this year. When owners of three or more properties sell surcharged properties, the maximum rate including local income tax reaches 82.5%. To maintain fairness, discussions are focusing on partially reducing the surcharge additional rate (currently 20-30 percentage points) or limiting relief to sales that reduce property counts, rather than reapplying the previous suspension level. The government is also examining caps on the number of times or cumulative total benefits for capital gains tax exemptions and deductions available to single-home households, which could restrict the accumulation of tax benefits through repeated high-value home transactions.
Five Major Banks Raise Deposit Rates to 3.2% as Mortgage Costs Climb
Hana, Nonghyup, Woori, Shinhan, and KB Kookmin Bank simultaneously raised one-year fixed deposit rates to around 3.2%, while K Bank operates products offering up to 5.0% rates. As of the 23rd, mortgage loan rates (5-year mixed/periodic type) at the five major banks were tallied at 4.82% to 7.55%, with NH Nonghyup Bank's mortgage rate ceiling already exceeding 7.5%. Second-quarter GDP growth of 0.6% exceeded the Bank of Korea's forecast of 0.2%, leading to expectations of an additional 0.25 percentage point rate increase next month. Analysts project that lending rate increases will continue for the time being, as room remains for further deposit rate increases.
FAQ
What did Lee Jae-myung announce at the real estate policy forum on the 23rd?
Lee Jae-myung stated at the forum on the 23rd that property holding taxes must be raised at least 3-fold to reach developed country levels, with the government examining progressive differential rates targeting ultra-high-value homes and multiple-property owners while providing relief for primary residences.
How have housing prices in unregulated areas changed since the regulatory expansion from the 1st and 5th?
Following the designation of Hwaseong Dongtan-gu, Yongin Giheung-gu, and Guri City as regulated areas from the 1st and land transaction permit zones from the 5th, adjacent unregulated areas experienced rapid price increases. A 84㎡ unit in Namyangju Dasan-dong rose 100 million won in one month to 1.078 billion won, and a unit in Hwaseong Byeongjeom-dong increased more than 70 million won in less than one month to 855 million won.
What capital gains tax adjustments is the government discussing for multi-property owners?
The government is discussing temporary capital gains tax relief to provide an exit path for multi-property owners, focusing on partially reducing the surcharge additional rate (currently 20-30 percentage points) or limiting relief to sales that reduce property counts, rather than reapplying the previous suspension level that ended on May 9 this year.
