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Taxes won’t fix the housing market

Published: 22 Aug. 2025, 11:13

Kim Yong-beom, director of national policy, is holding a press briefing on Aug. 20, at Yongsan Presidential Office, at central Seoul. [JOINT PRESS CORPS]

At a press briefing on Aug. 20, Kim Yong-beom, director of national policy, said, “It is a mistake to think that taxes will never be used in real estate policy.” His remarks suggested that the government may consider raising property taxes to achieve its policy goals of stabilizing the housing market and enhancing residential welfare.

Kim’s comment differs from President Lee Jae Myung’s campaign pledge that “housing prices will not be controlled with taxes.” Aware of the contradiction, Kim explained, “We will not get to the point of using taxes to control housing prices,” adding, “It was just a statement, not a campaign pledge.”

The suggestion that tax measures could be on the table is seen as a warning to the real estate market, which has shown signs of heating up again. Housing prices had somewhat calmed under the June 27 real estate package, which capped mortgage loans for homes in Seoul, the greater metropolitan area, and other regulated districts at 600 million won ($429,000). But as apartment prices in Seoul have begun to creep upward again — an indication that the loan restrictions are losing effect — Kim appears to have issued a stern message to counter the rebound.

Even acknowledging the policy need for housing market stability, invoking the threat of taxes is inappropriate. It is already well-established that housing prices cannot be controlled through taxation. During the Moon Jae-in administration, punitive taxes on owners of multiple homes, price caps on new apartment sales and lending restrictions were deployed as demand-suppression measures, but without a parallel supply policy, they only backfired, driving up housing prices and causing other negative side effects.

Demand suppression without sufficient supply only heightens market instability. What is needed is a robust supply strategy to stabilize housing prices. Otherwise, even if home prices are temporarily curbed, rents — both jeonse (a key money deposit system that's unique to Korea) and monthly — will rise, aggravating residential insecurity. On Aug. 5, the Korea Housing Institute warned that the effects of loan restrictions last no more than three to six months, and that “without a strong supply plan, pent-up purchasing demand could resurface on the back of low interest rates and economic recovery, fueling a sharp price surge in the fourth quarter.”

The supply shortage is already severe. According to the Construction & Economy Research Institute of Korea, new apartment completions in the greater Seoul area will plunge from 140,000 units this year to 100,000 next year. The situation could worsen further as construction companies, facing the government’s “war on workplace safety,” may slow operations, causing delays and disruptions in new projects. The result would be even tighter supply, intensifying upward pressure on prices.

If the government tries to stabilize the housing market by raising taxes without addressing supply, the public may suspect that the real motive is to plug the growing fiscal deficit by hiking property taxes under the pretext of “tax normalization.” The fundamental solution to the housing problem lies in supply. The government must urgently present a road map that clearly specifies where, how many and when quality housing units will be supplied to meet demand.

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.