South Korea on Aug. 3 unveiled its most sweeping overhaul of property taxes in nearly four years, raising the tax burden on owners of high-value and non-owner-occupied homes while preserving exemptions for most owner-occupiers in a move the government says is aimed at restoring fairness to the housing market rather than cooling home prices.
The tax package, part of the government’s 2026 fiscal reform proposal, marks the second consecutive year of revenue-raising measures under President Lee Jae Myung’s administration. After increasing corporate taxes last year, the government is now shifting its focus to real estate, arguing that housing should primarily serve as a place to live rather than an investment vehicle.
The proposal would fundamentally reshape South Korea’s comprehensive property tax by placing greater emphasis on a property’s market value instead of the number of homes owned. It would raise the annual cap on tax increases to 200% from 150% and increase the assessment ratio used to calculate taxable value to 70%–80% from 60%, resulting in higher tax bills for owners of expensive properties.
Single owner-occupiers would remain largely protected. Owners of primary residences valued at up to roughly $1.5 million would continue to be exempt from the comprehensive property tax. By contrast, owners who do not live in their homes would receive a substantially smaller exemption, increasing their taxable base.
Tax liabilities would begin rising for owner-occupied homes valued at roughly $2.6 million, with substantially higher bills for properties exceeding approximately $3.4 million. Owners of ultra-high-value one- and two-home portfolios would also become subject to the top tax rate of 5%, matching the rate currently imposed on owners of three or more homes.
The government also plans to replace South Korea’s long-term capital gains deduction with a residency-based system beginning in 2029. Current rules allow homeowners to deduct as much as 80% of capital gains largely based on the length of ownership. Under the new framework, tax benefits would depend solely on how long a homeowner actually lived in the property. The deduction would also become subject to a monetary cap for the first time, tightening tax treatment of large gains.
Finance Minister Koo Yun-cheol said the reforms are intended to normalize tax policy rather than suppress housing prices.
“A home should be for living, not simply for buying,” Mr. Koo said, adding that the government intends to restore what it considers normal taxation for high-value properties while scaling back what it views as excessive tax benefits for multiple-home owners and investors.
Officials acknowledged the changes could have secondary effects on the housing market by encouraging some investors to sell properties, potentially increasing supply and easing price pressures.
Economists are divided over the likely impact. Some say higher holding costs, combined with tighter mortgage regulations and the prospect of higher interest rates, could discourage homeownership and increase listings, putting downward pressure on prices—particularly in Seoul’s luxury apartment market, where many of the country’s highest-valued homes are concentrated.
Others argue the measures do not go far enough. Critics say wealthy homeowners are likely to absorb the higher taxes without significantly changing their behavior and have questioned why tighter limits on capital gains deductions will not take full effect until 2029.
The reforms have also renewed debate over the complexity of South Korea’s property tax system. Annual changes in assessed property values, tax brackets and assessment ratios make future liabilities increasingly difficult for homeowners to predict. Some analysts have also questioned whether higher holding taxes could place disproportionate pressure on retired homeowners with limited incomes, potentially forcing them to relocate.
Beyond housing, the broader tax package expands the Earned Income Tax Credit for lower-income households, increases research and development tax incentives outside the Seoul metropolitan area and introduces a new production tax credit for strategically important industries, including semiconductors, solar equipment and rechargeable batteries.
The Finance Ministry estimates the package will generate roughly $2.5 billion in additional tax revenue over the next five years. While the proposal is expected to reduce the tax burden on many businesses, higher property taxes are projected to account for the bulk of the additional revenue, underscoring the administration’s effort to shift more of the fiscal burden onto high-value real estate.
