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Higher property taxes alone won’t stabilize housing prices

Published: 21 Oct. 2025, 00:00

Apartment complexes in Seongdong and Gwangjin districts in Seoul [YONHAP]

Finance Minister and Deputy Prime Minister Koo Yun-cheol stirred controversy after saying, “In the United States, if a house is worth 5 billion won [$3.5 million], you pay 50 million won in property tax every year. When half your annual income goes to taxes, you can’t endure it.” His remark, which appeared to justify higher property taxes as a means to cool the market, came at a time when policymakers should be emphasizing steady supply rather than renewed restrictions. Even within the Democratic Party, some lawmakers criticized the statement, calling the idea of controlling housing prices through property taxes “an ill-conceived policy.”

If Korea wants to mirror the U.S. system, it must first replicate the same institutional environment. The United States does not impose multiple overlapping regulations on transactions and lending as Korea does. Ignoring these structural differences distorts the comparison. Korea has also seen this approach fail twice before. Under the Roh Moo-hyun administration, the introduction of the comprehensive real estate tax in 2005 only accelerated price hikes. Later, President Moon Jae-in’s heavy taxation of multiple homeowners doubled housing prices in Seoul. Punitive taxation without sufficient supply discouraged genuine buyers while fueling speculation.

The market now faces a severe credit squeeze and a collapse in transactions. With mortgage restrictions still in place, property sales have dried up, worsening shortages in long-term leases and driving up rent. Balloon effects are appearing in nearby unregulated regions. In such conditions, raising property taxes while lowering transaction taxes will not revive the housing market.

The minister’s comment was also poorly timed given Korea’s history of erratic tax policy. Each administration has swung between harsh and lenient measures, deepening market uncertainty. The Yoon Suk Yeol administration eased the previous government’s punitive rules for multiple homeowners by lowering the assessed property-to-market value ratio. Yet President Lee Jae Myung’s government has reimposed tighter controls on loans and transactions. As a result, anxiety is growing that “stronger regulation” signals another surge in housing prices — a pattern already familiar from the previous administration.

President Moon's tax hikes created a rush for “one smart home,” concentrating demand in prime areas. The current government, while claiming a different approach, has repeated the cycle by strengthening similar restrictions, driving more buyers toward southern Seoul and Gyeonggi.

Ultimately, the burden falls on genuine buyers. Uniform lending rules have effectively cut off the ladder to home ownership. One resident lamented, “I’ve raised four children and stayed without a house for twelve years, but without cash on hand, I have to give up on applications.”

What the government needs most now is not rhetoric about tax fairness but a realistic plan to protect such families. Beyond targeted relief, policymakers must balance modest property tax adjustments with a credible, long-term housing supply strategy. Above all, the government should abandon its stop-and-go approach to housing policy. Only consistent, supply-driven measures — not regulation or taxation — can bring lasting stability to the housing 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.