"Future Home Prices Hinged on Tax Policy and Interest Rates"... Lending Rules and Supply Also Key Indicators [Year-End Real Estate Outlook]

[Real Estate Outlook Beyond Year-End] Home Price Drivers
"Tax Reform" Cited Most, at 55.6%
Key Factors in Ownership Costs and Returns
"Base Rate Hikes" Cited by 50%
Rising Mortgage Rates Add to the Burden
Lending Restrictions and Housing Supply in the Seoul Metropolitan Area

In a survey conducted by The Asia Business Daily on October 28 and 29 among real estate experts and licensed real estate agents, the largest share of respondents cited “tax policy and interest rates” as factors likely to affect home prices in the future. The government had previously announced a tax reform plan that would replace the ownership deduction with a residence-based deduction and raise the threshold for comprehensive real estate tax (CRET) to homes valued at KRW 1.4 billion.

The ruling and opposition parties will begin work in earnest on tax reform this November. The pace and scale of any base rate increases also remain uncertain. The government is making a concerted effort to boost housing supply, but tangible results are expected to take at least two or three years. This is seen as one reason people are paying closer attention to the direction of tax policy and interest rates.

Asked which factors they expected to affect home prices next year and beyond, 55.6% of respondents cited “tax reform” (multiple responses allowed), the most common answer. Taxes related to real estate, including property taxes (CRET and property tax), acquisition tax and capital gains tax, are considered key factors in determining the cost of home ownership and potential returns. Attention is therefore focused on how lawmakers will resolve the issue during parliamentary discussions that will continue through the end of the year. In particular, even members of the ruling party have criticized proposed reforms intended to encourage owner-occupancy, such as reducing the CRET basic deduction for owners of a single home who do not live in it or scaling back capital gains tax benefits. This could prompt the government to adjust the pace of reform.

As many as 50.0% of respondents cited base rate increases as a factor affecting home prices. The Bank of Korea raised rates in both July and August, and has continued to signal that it could raise them again in 2026. This is because economic growth remains solid on the back of strong exports, while inflationary pressures persist and further rate hikes by the United States remain possible.

Mortgage rates are already clearly on the rise. In September, the annual rate on new mortgages issued by banks reached 4.88%, its highest level in more than 14 years. Variable-rate mortgages have increased sharply in recent months because their rates are relatively low, so rate hikes are expected to burden many borrowers. However, some analysts say the impact of rate increases may be less pronounced than in the past, given that stricter lending rules introduced last year have kept loan amounts per borrower relatively small.

A property listing displayed at a real estate agency in Dongdaemun-gu, Seoul. Yonhap News Agency.

Respondents citing lending restrictions and housing supply measures for the Seoul metropolitan area as factors affecting home prices accounted for 44.4% and 38.9%, respectively. The current administration has taken a stricter approach to managing household debt, but has recently shown some willingness to ease restrictions related to housing supply. The government is expected to assess the property market toward the end of the year before deciding how tightly to manage total household lending in 2027 and whether to introduce additional lending restrictions.

For housing supply measures, key issues are expected to include housing subscription applications and move-ins at third-generation new towns, which will gain momentum next year, as well as securing additional housing supply in Seoul. Other factors seen as likely to affect home prices include rising construction costs, such as raw materials and labor (25.0%); domestic and international economic conditions and growth rates (22.2%); and structural changes in the housing rental market, including a shift to monthly rent (19.4%). Some respondents also cited the pace of major development projects, such as the GTX metropolitan-area express rail network and semiconductor industrial complexes in Yongin and Gwangju, as well as whether private-sector redevelopment projects, including reconstruction and redevelopment, gain momentum.

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