Real estate is the most dangerous political variable for any government. It becomes even more volatile when caught in partisan politics. The Roh Moo-hyun and Moon Jae-in administrations, in particular, were hamstrung by housing prices and real estate tax policies. President Lee Jae-myung could not have been unaware of this. He expressed his resolve on X: "The National Sovereignty Government will eliminate national-destabilizing real estate speculation by any means necessary."
The initial 30% positive approval rating for the government's performance after taking office (38.9% in the fourth week of August, per Real Meter) indicates that public sentiment is slipping. While multiple factors may be at play, it is undeniable that housing prices and rental market instability have taken root. This likely explains why the government reverted the basic exemption for comprehensive real estate tax on non-resident single-homeowners to 1.2 billion won.
Initially, the government's approach was predicated on the perception that "non-resident single homeowners = speculators," regardless of individual circumstances. However, labeling these individuals as potential speculators based solely on whether they actually reside in their homes does not curb housing prices. The chronic supply shortage fuels speculative demand, which in turn drives up prices further. If houses were so abundant that prices would fall, no one would buy them.
If the root cause remains unresolved, the outcome will not change. Viewing the lack of homeownership as a problem caused by multi-homeowners hoarding properties and pressuring them has led to the "one smart home" phenomenon. Consequently, policies targeting ultra-luxury homes have expanded to include single homeowners and elderly retirees. In response, the market is circumventing regulations through "less smart single homes" and redevelopment shares, turning this into a game of whack-a-mole.
Recent market trends clearly illustrate this. Following the announcement of the the 3rd tax reform plan, Gangnam and Seocho showed weakness, but Seoul's overall apartment prices rose by 0.29% in the fourth week of August, while rental prices increased by 0.22%. Notably, apartment prices in northern Seoul areas such as Jungnang (1.99%) and Seongbuk (1.94%) surged nearly 2%, exceeding twice the Seoul average. The market does not respond to government goodwill but reacts to profit incentives.
Pressuring multi-homeowners and non-resident single homeowners could reduce private rental supply. Approximately 10,000 lease contracts in Seoul utilizing the contract renewal request right will expire by year-end. The burden of housing costs resulting from the disappearance of jeonse (lump-sum deposits) and a shift to monthly rent falls on tenants. Increased holding taxes may be passed on as higher monthly rents, and tenants unable to withstand this pressure may turn to buyers, triggering a vicious cycle where rising demand drives up prices again.
The Financial Services Commission also diagnosed last month's "Comprehensive Financial Measures for Real Estate Market Stability" as being driven by increased market liquidity, concerns over asset price appreciation due to inflation, and expectations of rising housing prices in the Seoul metropolitan area caused by supply shortages. Broad money supply (M2) reached a record high of 4,213 trillion won in June. With abundant money and insufficient supply, it is impossible to curb the universal desire for homeownership and inflation protection through taxes alone.
The government's dilemma is not unknown. Urban housing cannot be mass-produced like consumer goods, and achieving results from reconstruction and redevelopment projects within a single term is difficult. Moreover, construction and relocation phases can themselves stimulate prices, prompting the use of tax measures. However, this further reinforces the scarcity of properties in Seoul's core areas. The price of irreplaceable assets will not fall.
What people desire is not public rental housing but "a home they can buy." To send a strong supply signal to the market, approval and permitting processes for urban redevelopment and reconstruction should be expedited, and financial support expanded. Reducing burdens from transfer taxes and acquisition taxes should encourage multi-homeowners to list their properties, facilitating a virtuous cycle of transactions that transfers homes to genuine buyers who need them.
A vacuum state market with perfectly eliminated speculative demand does not exist. The psychology of protecting assets, the willingness to take risks for investment, and the desire to move to better housing are all part of the market. This does not mean speculation should be ignored. It means that only by prescribing solutions aligned with market rules can the government "win the game." Taxes cannot build homes.
in OPINION
