Government Eases Real Estate Tax Regulations in a Month

Furthermore, the plan to raise the comprehensive real estate tax burden cap from the existing 150% to 200% was withdrawn, reverting it to 150%.

Seok Gwang stated, "The main content is that the basic comprehensive real estate tax exemption for non-resident single-home owners, which they initially said they would lower from 1.2 billion won to 900 million won, has been restored to 1.2 billion won. The comprehensive real estate tax burden cap, which they said they would raise from the existing 150% to 200%, has also been restored to 150%."

Immediately after the government's revised plan was submitted to the National Assembly, the ruling party demanded even more relaxed tax reforms. The ruling party proposed an additional increase in the basic comprehensive real estate tax exemption for non-resident single-home owners from 1.2 billion won to 1.4 billion won.

They also advocated for maintaining the fair market value ratio at the current 60% and postponing the reform that would cap the long-term special capital gains deduction at 1 billion won. Seok Gwang explained, "Immediately after this bill was submitted to the National Assembly on September 3rd, the ruling party again brought up proposals such as raising the basic comprehensive real estate tax exemption for non-resident single-home owners to 1.4 billion won, maintaining the fair market value ratio at the current 60%, and postponing the reform that would impose a 1 billion won limit on the long-term special capital gains deduction."

The policy aimed to maintain or ease the tax burden for resident single-home owners while increasing taxes for non-resident homeowners to encourage them to put their homes on the market.

Specifically, the government sought to increase the resident's exemption from 1.2 billion won to 1.4 billion won, but tried to reduce the non-resident's exemption from 1.2 billion won to 900 million won. Seok Gwang noted, "The initial direction set by the government was quite clear: they would leave resident single-home owners alone, but increase taxes on non-resident single-home owners who own homes but do not reside in them."

Analysis suggests that the government's revision of real estate policy is not unrelated to its political background. President Lee Jae-myung's approval ratings have recently dropped to the 30% range, and the real estate sector is cited as one of the main reasons for this decline.

In particular, the government faces a situation where it cannot continue a strong drive to prevent a shift in public sentiment in the Seoul metropolitan area. As a result, the government is showing a willingness to compromise on real estate policy. Seok Gwang explained, "President Lee Jae-myung's approval rating recently dropped to the 30% range. While various reasons are cited for this decline, the real estate sector is considered to have a significant share in the drop, so real estate policy realistically can no longer be a strong offensive and must involve some degree of compromise."

This indicates that additional regulatory reinforcement has entered a stage where political costs outweigh policy effectiveness.

This implies that the government will likely focus on responding to current phenomena rather than pursuing fundamental changes in the real estate market's structure. Consequently, if additional regulations are enforced, the government will inevitably have to consider the ruling party and public sentiment in the Seoul metropolitan area.

Seok Gwang assessed, "I believe that the Lee Jae-myung government's real estate policy is approaching its culmination of offense. In a market that moves from countermeasure to countermeasure, while the government can respond to phenomena with countermeasures, it's impossible to bring about fundamental changes that alter the market's underlying nature."

If this part is nullified by the ruling party's demands in the National Assembly, the government's offensive in the real estate market is likely to lose its meaning.

The market's fear or incentive for quick sales due to strong regulatory warnings will decrease, and market interest will shift from regulation itself to market conditions and interest rates. Seok Gwang stated, "What I consider the most critical aspect of this real estate measure is the 1 billion won limit on the long-term special capital gains deduction. If such a provision is nullified by the ruling party's demands in the National Assembly, then it could be said that the government's offensive on the real estate market has virtually lost its meaning."