President Lee's 'normalization': What does it mean for South Korea's housing market?

South Korea's government has signaled a departure from using tax policy to directly control housing prices, a move that appears to break a key campaign promise. Seong Gi-hong, the Senior Presidential Secretary for Public Communication, stated that the government would not use taxes to curb rising home prices. This announcement has drawn immediate skepticism, with critics questioning the administration's priorities and suggesting a focus on other groups, such as tenants and wealthy retirees in affluent areas.

President Lee Jae-myung had previously pledged during his presidential campaign in May of last year to manage housing prices by increasing supply, rather than suppressing demand through taxation. He stated, "We will increase supply to maintain appropriate prices, not suppress prices with taxes when they rise." However, the government's recent "tax reform plan," announced on August 3, focuses on measures like the comprehensive real estate holding tax (종부세) for non-resident single-homeowners and increases in holding and capital gains taxes. Critics argue that this plan is not a comprehensive real estate policy but rather a tax adjustment.

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We will increase supply to maintain appropriate prices, not suppress prices with taxes when they rise.

Seong Gi-hong described the core of the plan as the phased "normalization" of burdens for non-resident homeowners and those holding multiple properties. The government frames its overall real estate policy goal as "market normalization," aiming not to artificially lower prices but to address what it deems "abnormal" market conditions. However, the shift away from the promised tax-avoidance strategy raises questions about the administration's commitment to its earlier pledges and its approach to the housing market.

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The burden on non-resident homeowners and multi-homeowners will be phased in for 'normalization'.