The expiration of the capital gains tax surcharge suspension for owners of multiple homes, arguably the signature real estate policy of the Lee Jae Myung administration since its inauguration in June 2025, finally took effect over the weekend.
On the surface, the move was simply the scheduled end of a temporary suspension. Yet the process leading up to the decision, both within the government and across society, was far from transparently discussed.
The capital gains tax surcharge system was first introduced in 2003 to encourage owners of multiple homes to put the properties on the market instead of continuing to hold them in anticipation of rising prices.
Depending on market conditions, however, the policy has repeatedly been tightened and relaxed over the years. Beginning in May 2022, the Yoon Suk Yeol administration extended the suspension annually under the justification of easing excessive tax burdens.
President Lee later used virtually every available platform, including social media, to explain the background of the measure and strongly emphasize his policy determination.
Still, the logic and tone of Lee’s remarks were neither rational nor particularly restrained, and evoked the kind of divisive rhetoric that categorizes people into "good" and "bad" groups. Aside from the fact that apartment and housing prices have surged sharply in selected areas, the government has not sufficiently explained the logic behind the decision.
Lee and his senior officials have merely repeated that the measure will stabilize housing prices without properly explaining how the policy is supposed to achieve that outcome.
One cannot help but suspect that the measure is less about stabilizing housing prices and more about demonizing the relatively small number of taxpayers subject to the heavier burden, while encouraging the broader public to focus on blaming “those few people” instead of discussing the structural causes and solutions behind housing market problems.
Since the announcement, many experts have warned that unless the government prepares adequate countermeasures, the greatest victims may ultimately be the broader public rather than the small group now being criticized.
Once the measure takes effect, owners of multiple homes may refuse to sell because of the heavier tax burden, leaving people seeking rental housing struggling to find homes or forced to pay sharply higher rents.
According to media reports, rental listings had already begun declining rapidly in several areas even before the policy officially took effect, while rents were already rising sharply. Many experts expect the trend to intensify further. Yet the government has not provided clear answers regarding how seriously it views the situation, how severe it expects conditions to become or whether countermeasures are being prepared.
The real estate market is fundamentally shaped by long-term structural forces, yet it too often moves according to short-term political schedules. Housing supply is determined over five or 10 years, even as policies shift according to election cycles, leading many market participants to pay closer attention to political news than economic fundamentals.
Housing market held hostage by politics
In South Korean society, real estate is not merely an economic asset; it is deeply tied to education, retirement, social mobility, marriage and regional inequality, making apartment prices in the Seoul metropolitan area an indicator that reflects both the hopes and anxieties of the country’s middle class.
Political leaders are fully aware of this reality, and that is why every administration eventually treats housing prices as a measure of political performance. That is precisely where policy instability begins.
When housing prices surge, governments tighten lending, raise taxes and pressure transactions, but when the market freezes and growth slows, they lower taxes, ease lending rules and begin talking about restoring market normalcy.
The tragedy begins because the real estate market depends on policy consistency, while supply expansion often takes years or even more than a decade to produce results, yet governments repeatedly reverse direction.
People begin calculating political schedules before listening to government announcements. Questions such as “Will this policy last?” “Will the next administration reverse it?” and “Will regulations be eased again before the next election?” become central to market expectations. Political expectations begin to influence price formation more than economic expectations.
Even when tax hikes are announced, people often choose to hold on if they anticipate a change in government or an upcoming election. Once policy credibility weakens, market participants no longer treat government signals as meaningful long-term variables. As a result, the country’s real estate policies have increasingly followed a pattern of stronger and more disruptive interventions.
In many cases, these attempts fail, and the reason is not insufficient intensity but rather a lack of consistency and logic. Policies should be implemented only after thoroughly analyzing market conditions. In reality, however, housing policy is too often politicized instead.
Another problem with politicization is that it encourages responses driven by short-term popularity while ignoring the deeply structural nature of the housing problem. Factors such as concentration in the Seoul metropolitan area, unequal distribution of quality jobs, low interest rates and liquidity, regional imbalances, population shifts and the concentration of educational infrastructure all interact simultaneously.
The frustration of young people without homes, the anxiety of existing homeowners, regional disparities and generational wealth gaps are all quickly transformed into powerful political language. The danger is that politics may end up amplifying social conflict rather than resolving it. Whenever power changes hands, previous policies are almost entirely discarded and replaced with new approaches, increasing uncertainty from the market’s perspective.
The real estate market is not an area that should move according to political events measured in months. It is the product of cities, demographics, industry and asset structures evolving over decades. Yet South Korea has treated it like a short-term political issue for far too long and the cost is increasingly returning in the form of market instability and social exhaustion.
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Yoo Choon-sik
Yoo Choon-sik worked for nearly 30 years at Reuters, including as chief Korea economics correspondent, and briefly as a business strategy consultant. The views expressed here are the writer’s own. — Ed.
khnews@heraldcorp.com
