South Korean presidential policy chief Kim Yong-beom signaled a potential shift in property tax policy, suggesting increased levies on high-value, single-homeowners, according to statements made earlier this month and elaborated on in a recent social media post. The move comes as the administration seeks to address concerns that leveraged investment in real estate poses systemic risks to the national economy.
Kim, in a Facebook post on Thursday, questioned the sustainability of the current structure allowing highly leveraged investment in apartments and non-owner-occupied multi-home properties. He argued that the existing system could transfer risks from individual investors to society as a whole during a market downturn. He cited the Japanese asset bubble collapse of the 1990s and the 2008 U.S. Financial crisis as examples where leverage amplified price fluctuations into systemic threats.
“The core issue isn’t the price itself, but the structure where leverage amplifies price volatility into systemic risk,” Kim wrote. He proposed a gradual reduction in loan-to-value (LTV) ratios for non-owner-occupied multi-home purchases, coupled with differentiated loan maturity structures, as a means of recalibrating investor expectations. He emphasized that a shift in expectations, signaled by consistent policy cues, is crucial for a successful transition.
Kim’s comments build on earlier remarks made to the Hankyeoreh newspaper on January 14th, where he indicated a review of the taxation of high-end, single-homeowners – often referred to as “똘똘한 한 채” (ttoltolhan han chae, or “smart single home”). He suggested refining the tax brackets and increasing the progressive tax rates for these properties, aligning them more closely with income tax structures. He noted that while the highest income tax rate in South Korea reaches 45%, property taxes lack a similarly progressive system.
The potential tax changes are being considered as the government assesses the impact of recently announced housing supply measures. According to Kim, tax policy will be revisited once the supply-side initiatives initiate to stabilize housing prices. The proposed adjustments would involve creating more granular tax brackets – potentially at 20 billion, 30 billion, and 40 billion won – and applying different tax rates within each bracket.
Ha Joon-kyung, the presidential chief of staff for economic growth, publicly endorsed Kim’s views on Thursday, sharing a portion of the policy chief’s Facebook post. This public alignment suggests a coordinated approach within the administration.
Kim acknowledged the role of leveraged multi-homeownership in providing rental housing supply, stating that any reduction in investment leverage must be accompanied by alternative solutions. He proposed fostering institutional investors offering long-term, stable rentals, expanding public and quasi-public rental housing, and providing systematic access to long-term, fixed-rate mortgages for owner-occupiers as potential replacements.
The discussion of potential tax increases on high-value properties follows earlier statements from Prime Minister Han Duck-soo, who in October 2024, indicated the need to examine taxation even for high-priced single-homeowners. He suggested that a home valued at 5 billion won should incur a substantial annual property tax, potentially equivalent to half of an average annual income.
