[비즈한국] The government has set the stage on a grand scale. Over the three days from July 14th to 16th, the Ministry of Land, Infrastructure and Transport, the Financial Services Commission, and the Ministry of Finance and Economy held a series of public hearings, with a "National Grand Debate on Real Estate," presided over directly by the President, scheduled for the 23rd. It is unusual for the government to disclose and debate contentious issues in front of the public before announcing policies. On the surface, this is certainly a step forward. However, what the market is interested in is not the format, but the conclusion.
Let's start by looking at the backdrop of these debates. Although buying sentiment has cooled slightly since the June 27th loan regulations, anxiety over housing prices, as well as jeonse and monthly rent in Seoul, remains persistent. The "balloon effect" in the capital region has continued, as evidenced by the additional designation of Hwaseong Dongtan, Giheung, and Guri as regulated areas. Since the market has not been stabilized despite repeated regulations, this is a time for the government to re-establish its rationale and direction before unveiling comprehensive measures for the second half of the year.
Therefore, this series of debates is not merely a venue for gathering opinions. It serves as a litmus test to gauge whether real estate policy for the second half of the year will lean toward strengthening tax systems or toward supplementing supply and stabilizing tenancy. The three days of preliminary debates have already revealed much. By reviewing these three sessions, the landscape of the 23rd and the outline of the measures that will follow become largely visible.
Day 1, Supply—"Regulations Are Blocking Supply"
The atmosphere of the housing supply debate hosted by the Ministry of Land, Infrastructure and Transport on the 14th can be summarized in one sentence: "Why have you choked off the funding for supply while claiming you want to increase it?" At the debate, there was an outpouring of complaints from redevelopment association members and experts. The core issues were threefold: relocation loan funding, floor area ratios, and mandatory rental ratios.
The issue of relocation loans, in particular, was desperate. As all of Seoul was designated a regulated area under the October 15th measures last year, the loan-to-value ratio for relocation loans dropped from 70% to 40%, and loans for those owning multiple homes were blocked entirely. A resident representative from a redevelopment zone appealed, "In older residential areas, there are almost no people who can move out with cash on hand." Projects are coming to a halt because, even after receiving management and disposal authorization, residents cannot afford to relocate. This means a bottleneck is forming at the very final gate of supply.
The same applies to the floor area ratio. A bill is currently pending in the National Assembly to increase the floor area ratio to 1.3 times the legal limit only for public-led redevelopment projects, and there were calls to expand this to private projects as well. This is because, with construction costs soaring, the only means to ensure project viability is to increase the floor area ratio. While the government has vowed to start construction on 1.35 million homes in the capital region by 2030, critics pointed out that there is not even a "long-term residential welfare roadmap."
There were also notable proposals. One was to convert the usage of underutilized urban land, such as semi-industrial zones, and have the government proactively stockpile land to create a "third axis of supply" following redevelopment projects and new residential sites. On the other side, there were arguments to significantly expand the proportion of public rental housing and use excess tax revenue from the semiconductor boom to fund it. Although the methodologies differed, there was no disagreement that "speed" is just as important as the total volume of supply. No matter how high the planned volume is, the market will not react if it does not lead to actual construction and occupancy. The conclusion of the supply debate was clear: the enemy of supply is not demand, but regulation.
Day 2, Finance—The High-Order Equation Between Protecting Actual Demand and Stimulating the Market
The Financial Services Commission debate on the 15th was condensed into three main points: loan regulations for young people and first-time homebuyers, jeonse loans, and the reappearance of the relocation loan issue. Unlike the first day, the debate was evenly split.
Those advocating for easing loans for actual buyers pointed out that after the June 27th loan regulations, the ladder for newlyweds and those who do not own homes—who actually need to buy houses—has been broken. The opposing side countered that easing loans now could reignite a market that is showing signs of stabilization. Regarding jeonse loans, proponents argued they are an essential mechanism for residential stability for the working class, while critics argued they push up jeonse prices and act as fuel for "gap investment." The relocation loan issue also saw a clash between the argument that "it should be viewed as project costs for supply, not household debt" and the counter-argument that "it links to speculative demand." There was even a new proposal to impose a "macro-prudential management levy" on loans for high-priced homes.
The financial debate highlighted the dilemma faced by financial authorities. They must tighten total household debt, protect actual buyers, and keep supply funding flowing. A loan policy that catches all three rabbits at once does not exist. Ultimately, it is a matter of priority, and the 23rd will be the venue for setting those priorities.
Day 3, Tax—The Direction of Strengthening Holding Taxes Is Already Set
The Ministry of Finance and Economy debate on the 16th was the most significant of the three days, and its direction was the most distinct. There was a succession of opinions that the comprehensive real estate tax assessment criteria should shift from the current "number of homes" to "value of homes held." The diagnosis was that the current structure, where a person owning three homes worth 1 billion won each pays higher taxes than someone owning a single home worth 3 billion won, has created a bias toward owning one "smart" home. The presenter presented data showing that while Seoul Southeastern district apartment prices rose 166% since 2016, consumer prices only rose 25%, using this as a starting point for the discussion on tax equity.
The theoretical basis for strengthening holding taxes was also presented. It was argued that South Korea's level of holding taxes is lower than that of G7 and other advanced countries, and that holding taxes are economically efficient in terms of resource allocation. Of course, this is debatable. The high holding taxes in advanced countries operate within an entire system of low transaction taxes, a stable assessment system, and linkages with local government finance. If you transplant only the holding tax rate, side effects will appear first.
The prevailing opinion on the long-term holding special deduction was to reorganize it from a "holding" basis to an "actual residence" basis. The argument is that the deduction should be granted because the owner actually lived there, not because they owned it for a long time. There was even a specific design proposed to start from a 10% deduction for 5 years of residence, increasing the rate as the period grows to a maximum of 40% for 20 years or more. Pointing out that the current system, which grants up to an 80% capital gains tax deduction even for ultra-high-priced homes, is excessive, the table also included discussions on whether to maintain the punitive capital gains tax on multiple-home owners (20 percentage points for two homes, 30 for three or more) and whether to adjust tax benefits for registered rental business owners.
Regarding transaction taxes, many argued for lowering the capital gains tax burden in exchange for strengthening holding taxes to provide an exit path for properties to enter the market. Vice Minister Koo Yun-cheol's remark that "if we raise both holding and capital gains taxes, people will ask if we want them to die" suggests that the government is already contemplating a swap structure of "strengthening holding taxes and easing transaction taxes."
What the Three Debates Tell Us, and the 23rd
The composition across the three days is interesting. In the supply and finance debates, voices crying out to "ease regulations" erupted, while in the tax debate, the current of "we must tighten" was dominant. However, looking at the list of issues that the President publicly shared on social media ahead of the debate, it becomes clear where the center of gravity lies. Appropriate holding tax levels, the distinction between a primary residence and multiple homes, separate treatment for ultra-high-priced homes, the relationship between holding and transaction taxes, and the use of holding tax revenue. All seven issues are related to taxes. While the Grand Debate on the 23rd is said to cover supply, finance, and tax, the main agenda will be tax.
The variable is the misalignment between the central government and the Seoul Metropolitan Government. Seoul Mayor Oh Se-hoon is publicly challenging the government, stating that the core agenda of the debate should be expanding supply and stabilizing the jeonse and monthly rent market, not taxes. The Seoul government's logic is that since there are virtually no new residential sites in Seoul, redevelopment projects are the only axis of supply, yet project speeds are slowing down due to rising construction costs, delayed permits, and increased financial expenses. Although Seoul's opinion was conveyed at the supply debate, the city itself did not participate. It is questionable whether measures produced while at odds with the Seoul Metropolitan Government, which is the entity responsible for implementing Seoul's housing policy, can function properly on the ground. This is why opposition parties and some experts are concerned that "this could become a formality with the answers already decided."
My personal outlook is as follows: First, the broad framework of shifting the tax system from "number of homes" to "value and actual residence" is effectively a done deal. A combination of gradually strengthening holding taxes—initially applied to ultra-high-priced and non-residence homes—while partially easing capital gains taxes to induce the release of properties is highly likely. This will be included in the tax reform plan to be announced between late July and early August, right after the debate. Second, in the supply sector, it is highly probable that some of the demands poured out on the first day, such as conditional easing of relocation loans and shortening redevelopment procedures, will be accepted. It is difficult for the government to explain why it continues to block relocation funds while calling for increased supply. Third, loans for actual buyers will likely see only minor adjustments limited to young people and those without homes.
The market impact must also be weighed coldly. The shift from "number of homes" to "value-based" criteria is correct in direction. The initial bias toward one "smart" home was not created by the market, but was a distortion caused by a tax system centered on the number of homes. However, market reactions will vary completely depending on where the threshold for "ultra-high-priced" is set. If the threshold is low, the tax burden on primary residences in high-end areas will surge, leading to greater tax resistance and a new balloon effect where demand clusters just below the price threshold. Conversely, if the punitive tax on multiple-home owners is effectively eased, there is room for dormant demand for multiple homes in provincial areas and the outskirts of the capital region to revive. Depending on where the tax blade points, the regional temperature difference will widen further.
The key is the order and speed of policy. In the short term, strengthening holding taxes may lead to "holding out" and passing costs onto tenants in the form of higher jeonse or monthly rent, rather than increasing properties for sale. If the tax burden is shifted to tenants, the already unstable jeonse and monthly rent market will shake first. Jeonse prices are a leading indicator of the sales market. Policies that suppress demand through taxes have fast effects, but also fast side effects; supply policies have slow effects, so they must be started right now. Over the past several years, we have learned this lesson at a high cost.
For the debate on the 23rd to be successful, it must not be a mere formality with predetermined answers, but must include a concrete schedule for clearing the bottlenecks in supply. Even if tax reform becomes the main topic, what the market is truly waiting for is an answer to the question, "When, where, and how much will be supplied?" If you are an actual buyer, I suggest you wait for the numbers in the tax reform plan and supply roadmap that will be announced after the 23rd, rather than the talkfest of the day itself.
The market will enter a period of short-term wait-and-see before and after the policy announcement, but "wait-and-see" is not a strategy. You should set your own criteria based on the supply volume and jeonse price trends in the area you intend to live in, and simply judge whether the policy changes those criteria or not. Policy is not completed through debate. It is completed through execution. On the 23rd, let's watch the numbers that come after, not the words in the debate hall.