Property Tax Time: The Courage to Be Disliked

A recent government-organized real estate forum underscored a firm commitment to increasing property taxes, particularly targeting non-resident owners, those with multiple homes, and owners of high-value properties. While various opinions on supply, loans, and taxes were exchanged, the core message emphasized a stronger property tax regime. However, the debate notably sidestepped a thorough discussion on the fundamental social necessity of property taxes. Critics argue that imposing higher taxes without adequate public understanding and acceptance will inevitably lead to backlash.

“

The only clear will among the various opinions exchanged on supply, loans, and taxes was to strengthen property taxes.

The high cost of housing in Seoul is attributed to limited supply meeting consistent demand, coupled with existing owners' reluctance to sell even when their needs change. While building more homes is the ideal solution, it's physically challenging. A practical alternative is to facilitate the sale of existing homes to those who need them more. This requires incentivizing current owners to sell.

“

If you are told to pay more taxes without understanding the reason, it is natural for resistance to grow.

However, the current tax structure, characterized by low property taxes and high capital gains and acquisition taxes, works in the opposite direction. The article argues that property taxes should be levied broadly and predictably based on land and location value, rather than solely on the number of homes or residency status. This approach would encourage owners to regularly assess the value of holding scarce, prime locations. If the cost of holding outweighs the benefit, owners might be more inclined to sell.

“

The best solution is to build more houses, but that is physically difficult.

Reducing punitive capital gains taxes and high acquisition taxes would further ease housing mobility. While some taxation on capital gains is necessary, excessive burdens can deter sales. The current focus on taxing multi-home owners and the wealthy, while exempting primary residences, undermines the goal of reflecting the holding costs of scarce locations. Furthermore, concentrating the burden on multi-home owners could potentially increase rental costs for tenants. The government needs the "courage to be disliked" to implement these changes, balancing appropriate holding costs with reduced transaction burdens.

“

The combination of low property taxes and high capital gains and acquisition taxes works in the opposite direction.