On July 23, two days from now, President Lee Jae-myung will chair a nationally televised “People’s Grand Debate on Real Estate.” It caps three consecutive days of hearings held July 14–16 by the Ministry of Land, Infrastructure and Transport, the Financial Services Commission and the Ministry of Finance and Economy on supply, finance and taxation respectively. Whatever emerges will feed into a tax reform package due in late July or early August. In effect, this week sets the direction of Korea’s property policy for the year. 🏠

TL;DR

  • A presidential “People’s Grand Debate on Real Estate” takes place July 23. Holding tax and transaction tax reform, lending regulation, and supply methods are all on the agenda.
  • Kim Yong-beom, senior presidential secretary for policy, said the tax reform package will be announced “by early August at the latest.”
  • Seoul Mayor Oh Se-hoon (“redevelopment and reconstruction are essential”) and the presidential office (“not a master key”) are publicly at odds over how to deliver supply.

Seoul Prices Have Risen for 74 Straight Weeks

Behind the government’s turn to public consultation sits a housing market it has not managed to cool. According to the Korea Real Estate Board’s weekly apartment price survey, Seoul apartment sale prices rose 0.30% in the second week of July (as of the 13th), unchanged from the previous week and extending the streak to 74 consecutive weeks of gains. Nationwide prices rose 0.11% and Seoul jeonse prices 0.28%. The board noted that while some areas show buyers and sellers holding back, transactions at higher prices continue around stations, large complexes and estates pursuing reconstruction.

At a July 10 briefing, Kim Yong-beom explained the rationale: “The government does not believe property policy can be completed by the government’s judgment alone.” He added a caveat, however — “we cannot make policy decisions as if running a popularity contest.”

What Came Out of the Three Ministry Hearings

Three ministries each held a day of public hearings from July 14 to 16.

  • July 14, supply (Ministry of Land): Chaired by Minister Kim Yun-duck at 2:30 p.m., with roughly 60 participants including experts, the housing and finance industries, and members of the public. The session focused on on-the-ground obstacles to housing supply.
  • July 15, finance (Financial Services Commission): Chaired by Chairman Lee Eok-won at the Bank Hall in Jung-gu, Seoul. Jeonse loan guarantees, relocation financing for reconstruction, aggregate lending caps and the scope of DSR rules were the main issues.
  • July 16, taxation (Ministry of Finance and Economy): Deputy Prime Minister Koo Yun-cheol raised the basis for calculating the comprehensive real estate tax, the definition of ultra-high-priced housing, and the long-term holding special deduction. Participants reportedly voiced broad support for revising the holding tax.

The New Variable in Tax Policy: the “Ultra-Expensive Single Home”

The holding tax is drawing the most attention. President Lee had long treated a holding tax increase as a “last resort,” but the tone has shifted recently. At a July 14 cabinet meeting he said, “In property taxation, what matters most is equitable taxation, yet in housing the tax system has been heavily distorted and deformed.” He went on: “Even for an owner-occupied single home, if it is ultra-high-priced, it would be good for it to bear an additional holding burden beyond the usual.”

Until now, property taxation has targeted multiple-home owners using the number of homes as its yardstick. Taxing an owner-occupied single home more heavily because of its price is a different premise altogether. The July 16 hearing raised a related question: whether to shift the comprehensive real estate tax base from number of homes to home value.

How the holding tax and transaction tax interlock is the other open question. One camp argues that if the holding tax rises, capital gains tax should fall so that properties come onto the market; another holds that realized capital gains warrant their own tax. Some reports suggest the leading option is to strengthen the holding tax while deferring capital gains tax for about a year to encourage selling, then tighten capital gains tax in stages. This is not a confirmed government plan, however, and is better read as speculation.

Will Lending Rules Ease for Genuine Buyers?

The most common topic on the public suggestion board was not taxation but finance. According to Newspim, as of 5 p.m. on July 20 the property policy suggestion board had received some 2,500 submissions, of which roughly 1,100 — close to half — concerned finance. The count varies depending on when it is taken.

Most of the submissions ask for looser rules: easing loan limits for owner-occupiers, expanding lending in non-regulated and depopulating areas, relocation loans, and scrapping blanket restrictions on balance-payment loans. First-time buyers and those about to move into pre-sold units are pressing for group loans and balance-payment loans to be exempted from aggregate lending caps. The task facing the debate is how to distinguish genuine buyers blocked at the lending threshold without abandoning the market-stabilization stance.

Government and Seoul City Diverge on Supply

Supply looks likely to be the sharpest point of contention, because the gap between the central government and the Seoul city government is already public.

Mayor Oh Se-hoon wrote on Facebook on July 20 that “redevelopment and reconstruction are a core means of supply and an essential task.” Arguing that “Seoul is no longer a city with empty land left,” he criticized what he sees as a lingering view within the government that treats redevelopment projects as a symbol of speculation.

Kim Yong-beom took the opposite position on KBS’s “Sunday Diagnosis” on July 19, saying “redevelopment and reconstruction are not a master key.” His reasoning: such projects take at least three to five years in theory before occupancy, so in the short term supply may actually contract, and a slightly flawed design can fuel speculative demand.

The two are arranging a meeting to discuss housing supply policy, but Mayor Oh has reportedly not been invited to the July 23 debate. Seoul city officials did attend the earlier ministry hearings as observers and submitted their proposals there.

The government announced a plan last September to supply 1.35 million homes in the greater Seoul area by 2030 — an annual average of 270,000 construction starts, about 1.7 times the level of the past three years. Its centerpiece was a shift under which public land developed by LH would no longer be sold to private developers but built out by LH directly.

Three Things to Watch on July 23

Three points are worth watching.

First, the scale and scope of any holding tax increase. Whether “ultra-expensive single homes” join multiple-home owners as targets, and where the threshold is drawn, is the crux. The number of households affected changes sharply depending on where that line falls.

Second, the sequencing of holding tax and capital gains tax. Raising the holding tax alone while leaving capital gains tax untouched locks up supply; cutting capital gains tax invites arguments about revenue and fairness. The combination the government chooses is itself the signal it sends to the market.

Third, whether lending rules carve out exceptions for genuine buyers. With nearly half of all submissions concerning finance, the guidelines that emerge here will be felt most immediately by those facing a balance payment.

That said, Kim’s remark that policy cannot be decided “as if running a popularity contest,” together with observations that the government’s policy design is already near completion, leaves open how far public sentiment from the debate will shape the final package. The confirmed details will appear in the tax reform announcement due in late July or early August.

※ This post is for informational purposes only and is not investment advice.

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