'Holding tax and transaction tax both to rise'... High-value homes face tax 'bomb' surpassing Moon Jae-in government

South Korea's government is reportedly preparing a tax reform package set to be announced early next month, which includes a dual strategy of strengthening both property holding and transaction taxes for owners of high-value homes. This move is expected to significantly increase the tax burden on those owning expensive properties.

The proposed measures involve raising the comprehensive real estate holding tax, often referred to as the 'comprehensive real estate tax,' which directly impacts the annual cost of owning property. Simultaneously, the government plans to curtail the long-term capital gains tax benefits for property sales. These benefits typically allow owners to reduce their tax liability based on how long they have held the property, thus incentivizing longer ownership periods.

This combined approach, which targets both the ongoing cost of ownership and the profit from selling, marks a significant tightening of property tax policy. Observers note that this strategy is even more aggressive than that implemented during the previous Moon Jae-in administration, which also faced criticism for its property tax policies.

Real estate market analysts and participants are expressing concerns about the potential repercussions of these tax hikes. They anticipate that the increased financial pressure on high-value property owners could lead to a significant slowdown in property transactions. Furthermore, a reduction in the availability of properties on the market is also a predicted outcome, as owners may become reluctant to sell under the new tax regime. This could potentially exacerbate existing housing market challenges.