After Five Forums, Real Estate Policy Outline Emerges: Property Tax Based on Value, Targeted Lending, Greenbelt Review (Comprehensive)

Government Finalizing Comprehensive Real Estate Policy and Tax Reform
Higher Property Holding Taxes and Temporary Eased Capital Gains Tax... Exit Route for Multiple Homeowners?
Project Period for Third New Towns to Be Halved... Non-Apartment Housing

If the tax reform plan and comprehensive real estate measures the government is preparing are finalized as outlined in the five rounds of government-led public forums, it is expected that property holding tax will be reorganized to focus on housing value, selective easing of lending restrictions will take place, and support for non-apartment new builds will be expanded to increase supply. The measures are also likely to include differentiated capital gains tax for multiple homeowners and partial lifting of greenbelt zones.

The series of government-run public debates, which had continued for the past two weeks, concluded on July 27 with the "National Real Estate Policy Discussion Forum" chaired by Prime Minister Han Seongsook. Originally, the forums were scheduled to end after those led by the Ministry of Land, Infrastructure and Transport, the Financial Services Commission, the Ministry of Economy and Finance, and finally President Lee Jaemyung. However, at President Lee's suggestion, an additional session chaired by the Prime Minister was held to ensure thorough deliberation if previous discussions were insufficient. According to Kim Jin, Director of the Economic Policy Coordination Office at the Prime Minister's Secretariat, a total of 7,153 public comments had been submitted to the real estate forum website as of 3 PM that day: 2,277 on supply, 2,833 on finance, and 2,012 on tax issues.

Tax: From Number of Houses to Housing Value as Assessment Standard for CMHT

Prime Minister Han Seong-sook, Deputy Prime Minister and Minister of Economy and Finance Koo Yoon-chul, and Minister of Land, Infrastructure and Transport Kim Yoon-duk are responding to questions from attendees at the National Real Estate Policy Discussion Forum held at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul on the 27th. Photo by Yoon Dong-ju

Within the tax domain, it is highly likely that the Comprehensive Real Estate Holding Tax (CMHT) will be assessed based on the combined value of owned homes rather than simply the number of properties. The purpose is to address the distortion whereby someone with a single house worth 3 billion won incurs a lower tax rate than a person with three homes worth 1 billion won each.

The government appears poised to use total housing value and residency status, rather than the number of properties, as the core tax indicators. Kang Sunghoon, a professor at Hanyang University who attended both the Ministry of Economy and Finance and presidential forums as well as the forum that day, suggested maintaining or reducing CMHT liability for owner-occupiers with one house below a certain price and setting a cap on tax credits for very expensive owner-occupied homes. For non-occupant single-home owners, he proposed focusing deductions on years of occupancy rather than holding period, and for multiple homeowners, adjusting the basic deduction, the ratio of fair market value, and the tax rate.

Koo Yoonchul, Deputy Prime Minister and Minister of Economy and Finance, stated, "We will consider differentiating capital gains tax burdens for properties that are held for long periods without being occupied." The intention is to reduce the tax burden for owner-occupiers with one home, while curbing tax benefits for expensive or non-owner-occupied residences.

The special long-term holding deduction for capital gains tax for single-home family units may also be changed to focus on residency period. Under the current system, for a family unit with one home and transfer price exceeding 1.2 billion won, there is a maximum 40% holding period deduction and a separate maximum 40% occupancy period deduction. At the forums, proposals included limiting the holding period deduction for non-resident homes, increasing the deduction for years of occupancy, and capping deductions for capital gains on especially high-value homes.

Limitations on the number of times the capital gains tax exemption can be received are also under review. At the July 23 forum, President Lee Jaemyung, who said he frequently follows the content of Lee Kwangsoo, CEO of Kwangsoonebokdeokbang, specifically invited him to speak. President Lee expressed support for Lee's proposal to restrict the one-home tax exemption to a single lifetime benefit, saying, "Allowing unlimited opportunities is problematic." He also floated the idea of applying a bigger deduction for the first sale, then reducing it for subsequent sales, or setting a lifetime cap on total tax relief a person could receive.

Another option under discussion is increasing the holding tax but temporarily lowering the capital gains tax for multiple homeowners selling properties. On July 23, President Lee commented, "You can't just strengthen holding tax without opening an exit (sales opportunity)," and Deputy Prime Minister Koo also stated on the 27th, "We are considering differentiated capital gains tax burdens for multiple homeowners who keep non-occupied properties for long periods," suggesting they are reviewing measures to temporarily facilitate sales by multi-homeowners.

The government is reviewing measures to avoid increasing the tax burden on owner-occupiers with one home and those owning mid- to low-priced homes. Prime Minister Han, citing the 2025 National Balance Sheet, stated that real estate accounts for 71.9% of household net assets. Raising taxes uniformly for all single-home owners would pose a significant shock to households; therefore, the government is likely to scale back tax relief first on non-occupant or high-value homes.

The price threshold for what constitutes a high-value home and the extent of deduction reduction have not yet been determined. Experts suggest 3 to 5 billion won, but public input ranges widely from 1 to 10 billion won.

Finance: Lending Regulations to Remain, but Discomfort for Genuine Buyers to be Mitigated

President Lee Jae-myung is speaking at the National Real Estate Policy Debate held on the 23rd at the KBS Annex in Yeouido, Seoul. Photo by Yonhap News

In finance, the government is reviewing ways to maintain regulations on household and real estate lending, while introducing exceptions for first-time buyers, young people, and newlyweds. The policy mortgage income and asset criteria will be adjusted, and the government is also addressing problems such as buyers being unable to pay the balance due to banks' quota restrictions on total lending.

Kim Youngdo, Senior Research Fellow at the Korea Institute of Finance, suggested at the July 15 forum for the Financial Services Commission that while expanding youth policy mortgages, verification of income, assets, and housing prices should be used to prioritize genuine owner-occupiers. At the July 23 forum, he proposed sustaining support for rent loans to the housing-poor, but gradually phasing out loans used for luxury jeonse leases or “gap investment.”

On July 27, Financial Services Commission Chairman Lee Eogwon emphasized that "because supply is insufficient and there is excess liquidity in the market, easing loan regulations once again would spark a vicious cycle of housing price increases," stressing that it is "inevitable that household and real estate lending regulations remain consistent and strict."

However, Chairman Lee said that inconveniences for genuine buyers, such as youth and newlyweds, would be addressed individually. Key examples include the so-called “marriage penalty,” where combined income disqualifies couples from policy loans, and young people living with parents not being recognized as homeowners due to household separation rules.

Balance loans are also likely to be improved. Chairman Lee noted that even pre-sale buyers covered by previous lending standards may not get loans from banks, which are trying to comply with lending caps, and said the government would consult with banks. Issues such as the exclusive mortgages for New Home Sharing/Select pre-sale changing in the main application stage will also be reviewed separately.

For rent loans, support to the housing poor will continue, but the government is considering reducing lending or guarantees to homeowners and luxury rent arrangements. President Lee pointed out at the July 23 forum that rent loans have contributed to rising house prices and rent fraud. The Financial Services Commission is also considering whether to allow exceptions for genuine trades in currently banned “conditional transfer of ownership” rent loans, which were previously outlawed to curb gap investment.

There have also been calls to manage redevelopment relocation loans separately from standard mortgage loans. A Seoul city government official at the Financial Services Commission forum argued that the 600 million won limit for relocation loans is delaying resident moves, demolition, and construction starts. In contrast, some argue that deregulation would excessively benefit high-value redevelopment members in Seoul and bulk move-outs would push up rental prices in surrounding areas. Even if included in the comprehensive policy, support is likely to be limited to projects with low commercial viability or those close to breaking ground.

Supply: Reviewing Greenbelt Deregulation and Finance for Non-Apartment Units

Kim Yoon-duk, Minister of Land, Infrastructure and Transport, is drinking water at the National Real Estate Policy Forum held on the 23rd at the KBS Annex in Yeouido, Seoul, chaired by President Lee Jae-myung. Photo by Yonhap News

The housing supply package is expected to involve shortening the development period for new towns and public housing sites, supporting finance for non-apartment construction, and converting vacant shops and offices into homes. The Ministry of Land, Infrastructure and Transport is also considering partially lifting greenbelt restrictions in the Seoul metropolitan area if necessary.

Kim Yoonduk, Minister of Land, Infrastructure and Transport, stated, "I am willing to build homes even if it means releasing greenbelt areas," adding, "We are considering partial deregulation if needed to boost housing supply." However, as it is also important to consider environmental preservation and the risk of pushing up local property prices, it's likely that only principles of consideration, rather than specific candidate sites, will be included in the full plan.

Housing supply procedures are expected to shift from sequential to parallel processing. For example, designating land, obtaining construction permits, and reviewing guarantees by the Korea Housing & Urban Guarantee Corporation are to be handled simultaneously to bring forward ground-breaking dates. Parallel review is also slated for projects converting vacant shops, offices, and knowledge industry centers in urban centers to residential use.

Separate measures will address villas, officetels, and other non-apartment units that can be supplied quickly. Minister Kim explained that the Ministry is cooperating with the Financial Services Commission on support for non-apartment construction finance and fostering corporate landlords, and said decisions will be made soon. Topics under discussion include expanding construction finance, increasing guarantees by the Korea Housing & Urban Guarantee Corporation (HUG), and relaxing building regulations for row houses and multi-unit dwellings.

Regarding redevelopment and reconstruction, support will be targeted at individual projects rather than uniformly increasing the floor-area ratio. President Lee and Minister Kim both pointed out that the demolishing of existing housing during redevelopment can temporarily reduce supply and increase nearby rental prices. Priority will be given to supporting projects in less viable areas, shortening approval times, verifying construction cost estimates, and adjusting the proportion of rental housing by region.

Final decisions on the price threshold for high-value homes and the scope of deduction reduction, the period for relaxing capital gains tax for multiple homeowners, exception targets for genuine buyers, and candidate greenbelt sites will be determined following coordination among relevant ministries.

This content was produced with the assistance of AI translation services.