Home > Business > Economy

Finance Ministry considers comprehensive approach to property tax revisions

Published: 20 Oct. 2025, 12:09 Updated: 20 Oct. 2025, 12:12

A notice about real estate taxes is posted at a brokerage in Seoul on Oct. 19. [YONHAP]

Deputy Prime Minister and Finance Minister Koo Yun-cheol signaled the possibility of revising Korea’s property tax system, emphasizing the need to strengthen holding taxes on real estate.

"Strengthening property holding taxes aligns with the tax principle of ability to pay, which calls for fair taxation based on a taxpayer’s capacity to bear the burden," Koo said at a press conference held at the International Monetary Fund headquarters in Washington, D.C. on Sunday.

“If holding an expensive home becomes too burdensome, people will sell, and that will help increase liquidity in the real estate market,” said Koo.

“Korea has relatively low holding taxes and high capital gains taxes, which worsens the lock-in effect,” Koo added, referring to the tendency of homeowners to hold on to properties due to punitive transaction taxes. “We need to consider how to structure taxes on acquisition, holding and transfer of property in a coherent way.”

Koo stressed that the issue is not limited to multiple homeowners. “We also need to look at people who own a single, ultra-high-value home,” he said. “If someone with a 5 billion won [$3.52 million] home pays less in holding tax than someone with three homes worth 500 million won each, we need to ask which is more equitable.”

The government has launched a review of the broader real estate tax regime, with the core idea being to strengthen holding taxes while easing transaction taxes to revitalize the property market. Unlike previous efforts, the current discussion is reportedly focused on taxing ultra-high-value properties — so-called “smart single properties” — rather than solely targeting owners of multiple homes.

People look at apartments across Seoul from N Seoul Tower in central Seoul on Oct. 16. [NEWS1]

Last week, the government announced new housing market stabilization measures, including the formation of a task force to overhaul the real estate tax system and launch related research projects. A leading proposal is to gradually raise the official property value ratio and fair market value ratio, effectively increasing the holding tax burden — a policy first adopted by the Moon Jae-in administration.

Koo noted that under the U.S. system, a 1 percent property tax on a 5 billion won home would amount to 50 million won annually. “It would be hard to manage if half of someone’s annual income goes to the holding tax,” he said.

Unlike the Moon administration, however, the current government is also considering easing transaction taxes. In 2020, the Moon administration initially acknowledged the need to reduce transaction taxes, but reversed course amid backlash over tax breaks for the wealthy, eventually increasing both acquisition and capital gains taxes — a move that failed to stabilize housing prices.

“To resolve the lock-in effect, we need a comprehensive approach — normalize holding taxes centered on property tax, while easing punitive acquisition and capital gains taxes,” Kim Woo-chul, a Science in Taxation professor at the University of Seoul.

Property listings are posted at a real estate agency in Seoul on Oct. 16, the first day of strengthened lending regulations for homebuyers. [NEWS1]

The government is also weighing measures to raise the tax burden on high-value homeowners. This marks a shift from previous policies that targeted multiple-property owners as speculative investors. Officials are reportedly considering raising the comprehensive real estate tax (commonly known as the "wealth tax") for owners of single, high-end homes and reducing benefits such as long-term ownership deductions and senior tax credits.

Still, a Finance Ministry official said the interagency task force — which includes the Ministry of Land, Infrastructure and Transport — is reviewing the issue from a mid- to long-term perspective, and no timetable has been set due to uncertainties such as next year’s local elections and the impact on local government revenues.

As of last year, acquisition tax revenue totaled about 26 trillion won, accounting for 22.8 percent of total local tax revenue. Property tax brought in another 15.1 trillion won. By contrast, national revenue from the comprehensive real estate tax on residential properties stood at only around 1 trillion won.

As a result, even a significant hike in the wealth tax on luxury homes would not be enough to offset losses from any cut in acquisition tax. A broad hike in property taxes could also trigger a political backlash, particularly in the Seoul metropolitan area, where support for the ruling party is seen as fragile.

Resident buildings are seen from Namsan Tower in Yongsan District, central Seoul on Oct. 14. [YONHAP]

Democratic Party senior official Jeon Hyun-heui on Sunday warned, “A holding tax increase should be the last resort,” calling for a cautious approach.

Unless a specific issue requires an immediate regulatory change, a full-fledged proposal for tax reform is expected to be unveiled after next June’s local elections.

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]]