Potential Shift in Real Estate Taxes: Focus on Balancing Property and Transaction Levies

[Anchor]

The government is scheduled to announce a plan to reform real estate taxes at the end of this month. Starting July 14, the day after tomorrow, it will also hold a three-day public forum on real estate. Experts point out that the reform ultimately needs to be directed toward encouraging existing homeowners to put their properties on the market and revitalizing transactions.

Reporter Lee Seong-hoon reports.

[Reporter]

This is an apartment complex in Banpo-dong, Seocho-gu, Seoul.

With the government-assessed value of an 84-square-meter apartment rising to over 700 million won, property holding taxes are expected to increase by more than 40 percent this year.

With the government also signaling a reform of real estate taxes, homeowners are finding their calculations increasingly complex amid forecasts that the burden of holding taxes could grow even further.

[Real Estate Agent in Seocho-gu, Seoul: "People are currently waiting to see how the tax reform will unfold, and depending on the holding tax, older homeowners are more likely to put their houses on the market."]

While the government's proposal has not yet been unveiled, potential measures being discussed include adjusting the official market value ratio used to calculate the Comprehensive Real Estate Holding Tax, reducing the special long-term holding deduction for non-resident single-home owners, and refining the system to focus on actual residents.

The government is also considering where to set the threshold for ultra-high-priced homes and shifting toward a taxation system based on the value of the home rather than the number of homes owned.

If the official market value ratio, currently at 60 percent, is raised to 80 percent, holding taxes in major areas of Seoul could increase by nearly 50 percent.

[Woo Byung-tak, Specialist at Shinhan Premier Pathfinder: "For high-priced homes in the Gangnam and Seocho areas, it is common for the increase to approach 50 percent. Even in other regions, including the Hangang Belt, holding taxes are expected to rise by at least 30 percent and up to 40 percent compared to the previous year."]

Although the actual tax burden may increase, some predict that the effect of inducing homeowners to dispose of their properties will be limited in areas where expectations for rising house prices remain high.

The argument is that raising holding taxes alone is unlikely to significantly increase the supply of homes for sale or stabilize prices.

The Organization for Economic Cooperation and Development (OECD) recently recommended a tax reform that reduces transaction taxes while increasing holding taxes. Deputy Prime Minister Koo Yun-cheol has also emphasized the balance between transaction and holding taxes, drawing attention to whether transaction taxes will also be reformed.

[Kim Woo-cheol, Professor of Taxation at the University of Seoul: "I believe that raising holding taxes while lowering transaction taxes, and simultaneously providing capital gains tax benefits, would be the way to bring more properties onto the market. Ultimately, the best approach right now is not to suppress demand, but to disperse it."]

The government plans to collect public opinion during a three-day open forum on housing supply, finance, and taxation starting July 14. Following a major real estate policy debate chaired by the President on July 23, it intends to announce the tax law amendment at the end of this month.

Reported by Lee Seong-hoon | Video by Ahn Yeo-jin | VJ by Jeong Han-wook
※ Please note: This article was translated by AI and may contain errors.