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South Korea has proposed changes to its property tax system to increase taxes on wealthy and multiple homeowners while offering relief to owner-occupiers with lower-value homes. The move comes as the government looks to address persistent house price inflation and growing public concern over housing affordability. Alongside the tax proposals, authorities are also introducing incentives for key domestic industries. The measures follow months of policy discussions on the property market and come after the central bank raised interest rates over concerns about rising home prices and inflation.
South Korea has proposed a series of property tax changes aimed at increasing the tax burden on wealthy homeowners while providing relief to people who own and live in a single home. The measures are part of the government's broader efforts to stabilise the country's housing market, where residential property prices have continued to rise despite earlier policy interventions.
The proposals were announced after President Lee Jae Myung chaired a closed-door meeting to review developments in the domestic stock and property markets. The discussion took place as the government continues to face public criticism over rising home prices and volatility in financial markets.
Finance Minister Koo Yun-cheol said the government intends to reform the real estate tax system with the objective of creating a housing market focused on residential use rather than investment. He indicated that the reforms are based on the principle that homes should primarily serve as places to live.
As part of the annual tax code revision, the finance ministry has proposed increasing property tax exemptions for people who own and reside in one house while reducing exemptions available to other property owners. The proposal also includes raising real estate holding tax rates by up to 2.3 percentage points depending on the value of the property. In addition, owners of multiple homes and high-value residential properties would face a higher overall tax burden under the revised framework.
The government clarified that households owning and living in a single home valued below KRW 3 billion (around USD 2.1 million) would see their tax burden reduced. Homes valued between KRW 3 billion and KRW 4 billion would be subject to gradual tax increases, while taxation on properties worth between KRW 4 billion and KRW 5 billion would be adjusted under a more standardised structure.
The latest proposal follows a series of public policy discussion forums organised by the Lee administration in the past month to address concerns over the housing market. Residential property prices in South Korea extended their upward trend for a 13th consecutive month in June, recording the fastest pace of increase since November 2021, highlighting the continued pressure on housing affordability.
The government's housing policies have also come under increasing public scrutiny. According to the latest Gallup Korea survey released in the past week, President Lee's approval rating declined to 51%, the lowest level in a month. Housing market policy emerged as the most frequently cited reason for negative public opinion for the first time since he assumed office in June 2025.
The Bank of Korea has also taken steps to address overheating in the housing market. Concerned that strong earnings in the semiconductor industry could fuel inflation and push property prices even higher, the central bank raised interest rates in the past month for the first time in three-and-a-half years. It also indicated that additional rate increases may be considered if inflationary pressures persist.
Apart from the property tax measures, the finance ministry has proposed new tax incentives to encourage domestic manufacturing. The plan includes tax exemptions for domestic production sold within the country across sectors such as solar energy, wind energy, rechargeable batteries, semiconductors, critical materials and artificial intelligence-powered robots.
The ministry is expected to submit the proposed tax code revisions to parliament by September 3, where they will be reviewed before any changes are implemented.
Source Reuters
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