Gov't expected to unveil new real estate stabilization package

Home > Business > Finance

Gov't expected to unveil new real estate stabilization package

Published: 09 Oct. 2025, 18:57 Updated: 09 Oct. 2025, 19:23

Audio report: written by reporters, read by AI

Tourists view the Seoul landscape in Namsan, central Seoul on Oct. 9. [YONHAP]

Despite earlier pledges that it would not curb real estate prices through taxation, the government is now considering strengthening property-related holding taxes. With housing prices in Seoul and the greater capital area continuing to rise despite new loan restrictions and supply measures — introduced on June 27 and Sept. 7, respectively — the government is moving toward a comprehensive real estate package.

Plans under review include raising the fair market ratio and the official appraisal ratio — both of which would effectively increase the tax burden. Other measures being discussed include expanding speculative zones and designating more land transaction permit zones.

According to sources familiar with the discussions, the government is expected to unveil the new real estate stabilization package as early as next week. The core of the plan is an increase in holding taxes. Rather than changing statutory tax rates or deductions directly through legal reform, the government is leaning toward raising the official appraisal ratio and the fair market ratio, which determine the tax base.

Under the current system, property taxes are calculated based on the taxable standard, which is derived by multiplying the market price by the official appraisal ratio and the fair market ratio. The fair market ratio is currently set at 60 percent — significantly lower than its peak of 95 percent under the Moon Jae-in administration. The Moon administration raised the ratio from 80 to 95 in stages and aimed to raise the official appraisal ratio to 90 percent of market prices by 2030, but that road map was effectively abandoned. The former Yoon Suk Yeol administration lowered it to 60 percent for owners of a single home. The current figure hovers around 69 percent.

For multiunit housing, this means the taxable standard amounts to just 41 percent of the market price — calculated as 69 percent times 60 percent.

Multiunit housing buildings are seen from Namsan in central Seoul on Sept. 29. [YONHAP]

The government is considering a plan to restore the fair market ratio to around 80 percent and gradually raise the official appraisal ratio. If the fair market ratio is restored to 80 percent and the appraisal ratio is increased to 90 percent, the taxable base would jump from 41 percent to 72 percent of the market price — a major hike in effective property taxes even without changing the tax rate. High-priced properties that have seen sharp value increases could be taxed up to the legal ceiling under this scenario.

The Lee Jae Myung administration had initially maintained that it would not control housing prices with taxes. However, with prices remaining stubbornly high, it is now signaling a return to Moon-era property tax pressure — though not through rate hikes. This shift has been reflected in recent comments from government officials. Land Minister Kim Yun-duk said, “Personally, I believe holding taxes should be increased.”

While some have called for more direct measures, such as raising comprehensive real estate tax rates, the Ministry of Economy and Finance and the Democratic Party are treading cautiously. During the Moon administration, holding taxes were significantly raised between 2018 and 2020, including higher rates for owners of multiple homes, which sparked public backlash as the tax burden spread to the middle class.

Apartment complex buildings are seen along the Han River from Namsan on Oct. 8. [YONHAP]

In addition to holding tax increases, the real estate package may include tighter loan limits and an expansion of regulated areas. Proposals include reducing the mortgage cap from the current 600 million won ($423,000) to 400 million won, lowering the debt service ratio from 40 percent to 35 percent or capping the loan-to-value ratio at 0 percent in certain areas. However, insiders say it may be difficult to introduce new financial regulations just three months after the high-intensity measures that were unveiled on June 27.

In contrast, there is relatively little opposition within the government to expanding regulated zones — making this the most likely next step. If discussions proceed, the government may simultaneously expand speculative zones and areas subject to adjustment measures and designate more land transaction permit zones. While mayors have the authority to designate permit zones within their cities, the land minister can make broader designations across multiple regions. Areas under consideration include the so-called "Han River Belt,” including the Seongdong District and Mapo District in Seoul, as well as the Bundang District in Seongnam, Gyeonggi, where recent price increases have been pronounced. However, the Democratic Party is reportedly concerned that tightening regulations ahead of an election could become a political liability.

The renewed focus on housing comes just three months after the government imposed strict loan regulations on June 27, limiting mortgages to 600 million won. Despite those measures, high-end apartment transactions have picked up again, and “gap investment” — where buyers use lump-sum jeonse leases, with jeonse being a real estate policy in which there is a negative correlation between deposit and rent to minimize upfront costs — is once again increasing, raising concerns about an overheated market.

Sales notices are put up at a real estate agency in Mapo District, western Seoul on Oct. 9. [YONHAP]

According to the Korea Real Estate Board, between June 30 and Sept. 29, apartment prices rose in several areas: Seongdong District in eastern Seoul, up by 5.01 percent; Bundang District in Seongnam, up by 4.99 percent; Gwacheon in Gyeonggi, up by 3.81 percent; Gwangjin District in eastern Seoul, up by 3.57 percent; Mapo District in western Seoul, up by 3.17 percent; and Yangcheon District in western Seoul, up by 2.88 percent.

Experts have voiced skepticism over the government's planned new measures.

“Ultimately, this is about suppressing demand, but past cases show that higher holding taxes have not had a meaningful effect on stabilizing home prices,” said Lee Eun Hyung, a research fellow at the Korea Institute of Construction Policy. “What the government should be doing is steadily announcing and executing supply-side policies — unnecessary demand suppression can send the wrong signal to the market.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM YEON-JOO [[email protected]]