Seoul Apartments Alone: Is South Korea's Property Policy Too Narrow?

South Korean President Lee Jae-myung has shown a firm resolve to tackle the nation's contentious property market, even at the risk of political backlash. During a recent national real estate policy forum, he declared, "Even if it means political damage, we cannot leave the real estate problem as it is." This statement, potentially emboldened by the upcoming general election being two years away, signals a commitment to addressing issues that deeply affect the majority of households, for whom homeownership is a primary asset and retirement plan.

The forum highlighted a growing consensus on strengthening holding taxes. The administration supports maintaining tax benefits for primary residents while increasing the burden on ultra-high-value properties. The article argues that current effective holding tax rates, which are less than half the OECD average, are insufficient, especially when compared to the high income tax rates applied to earnings over 100 million won. Normalizing holding taxes based on property value is presented as a necessary step to lower real estate investment returns and ensure that the benefits of prime locations are shared with the community.

A welcome development is the government's intention to establish clear legal standards for holding tax increases, moving away from the frequent policy shifts seen under previous administrations. The article notes that basing key tax assessment criteria, such as official property prices and fair market value ratios, on presidential decrees has led to instability. Codifying these principles into law is deemed urgent to overcome tax resistance and the growing trend of 'class voting,' where electoral choices are heavily influenced by property ownership status. This move aims to provide the predictability essential for fair taxation, as identified by Adam Smith.

Despite these efforts, a significant concern remains: the policy's narrow focus on Seoul's apartment market. Critics point out that discussions often overlook the struggles of young people facing high rents, even in areas where apartments are relatively affordable. The disproportionate impact of housing costs on the 40% of households that are non-homeowners is highlighted as a critical oversight. The instability in the rental market, which fuels speculation and price increases in the sales market, is also seen as a factor needing more attention. The delay in releasing the government's housing welfare roadmap further fuels criticism that the administration's gaze is fixed too narrowly on property owners and potential buyers, rather than on the broader spectrum of housing needs.