Seoul: Remarks by President Lee Jae Myung on revising the long-term holding tax deduction for homeowners have intensified controversy, raising uncertainty in the real estate market. In a post on X, Lee questioned why capital gains earned from rising home prices should receive significant tax reductions simply because a property was held for a long time, particularly when it was not used as a residence. His comments came in response to criticism from People Power Party floor policy chief Jeong Jeom-sig, who warned that such signals could encourage proposals within the ruling bloc to exclude even the owners of single homes from the deduction.
According to Yonhap News Agency, Lee went further by outlining possible measures, including a six-month grace period, followed by a partial reduction over another six months and a full abolishment of relief after one year. He also suggested codifying the changes in law to prevent future administrations from reversing them, arguing that this would remove incentives to delay implementation and make policy direction clearer.
The absence of a clear government or ruling party position has left the public confused. It remains unclear whether the system will actually be changed or how any revisions would be carried out. In the market, speculation is growing that after the June local elections, the ruling bloc will move to scale back the deduction and strengthen property taxes more broadly.
There may be a case for reviewing the tax system to improve fairness and curb speculative investment. However, any discussion of reform should proceed with caution, given the longstanding role the deduction has played in Korea's housing system. Introduced in 1989, the measure has served as a key tool for supporting housing stability and asset formation among middle- and lower-income households. Over time, the benefits were expanded, with the deduction rate reaching as high as 80 percent for gains exceeding 1.2 billion won. In 2021, eligibility requirements were tightened by separating holding and residency conditions, each set at 40 percent.
Altering a tax framework that has been in place for nearly four decades could have far-reaching consequences. Critics argue that the president's remarks risk equating long-term homeowners with speculative investors, a comparison that may not reflect reality. Market participants warn that abolishing the deduction and increasing the tax burden on single-homeowners could discourage property listings, trigger resistance to taxation, and drive up rental prices. They also caution that abrupt policy changes could amplify uncertainty and weaken confidence in an already sensitive market environment.