Under the 'August 3 Tax Reform Plan,' real estate tax standards are expected to shift from the existing 'ownership-centered' approach to one centered on 'actual residency and housing value.' The core of this is the differentiation of taxation based on residency status and housing prices. As the Special Deduction for Long-Term Holding is being reorganized into the 'Long-Term Residential Income Deduction,' and the deduction rate and limit (1 billion won) are scheduled to be adjusted in stages over 2028–2029, sophisticated response strategies are required. Therefore, to prevent asset losses amidst these increasingly complex calculations, we outline the key market changes and response strategies as follows.
Deepening polarization and the emergence of tax-saving properties
A simultaneous surge in demand and an increase in listings are expected. Popular areas for owner-occupancy with market values around 2 billion won, where the basic deduction for the Comprehensive Real Estate Tax (Jongbu Tax) is being raised to 1.4 billion won, are projected to continue experiencing concentrated demand. Meanwhile, for ultra-high-priced homes exceeding 3.5 billion won or non-residential properties—where the residence deduction limit (1 billion won) will be reduced and the Jongbu Tax burden will increase starting in 2029—listings are expected to increase in late 2027 and late 2028 as buyers seek to avoid the tax burden. There is a high likelihood that distressed sales aimed at short-term tax savings will concentrate in April and May, just before the property tax assessment date (June 1) for next year and the year after. If listings flood in during this period to avoid capital gains tax, bargaining power may weaken, making it difficult to receive fair prices.
Rental market instability and passing on of rent and deposit costs
There is a possibility that the supply of jeonse and monthly rent properties will decrease due to an increase in actual occupancy. Landlords may increasingly evict tenants and move in themselves to qualify for long-term residency tax deductions. Furthermore, as the burden of property and capital gains taxes on non-residents increases, the availability of jeonse and monthly rent properties is declining; there are growing concerns that some of this increased tax burden may be passed on to rents, thereby triggering instability in the rental market.
Interest in less regulated real estate types is expected to rise.
With housing taxation expected to tighten, commercial real estate such as offices, retail spaces, and knowledge industry centers, which are subject to relatively more flexible regulations, is likely to emerge as an alternative. However, rather than approaching this solely for tax savings, a selective approach involving a multifaceted analysis of factors such as the impact of high interest rates, vacancy rates, and actual rental yields by location is required. Since the deadline for tax reform is fixed, there is a risk that a flood of properties will hit the market at a specific time. Therefore, instead of selling urgently at the last minute, it is advisable to establish a sales plan with some buffer time.
A strategy of blindly holding out can be risky. Considering the burden of property taxes resulting from project delays at reconstruction sites and the requirement to fulfill a new 10-year residency requirement after moving in, the benefits of unconditionally holding out are expected to decrease. Therefore, it is important to consider various scenarios and weigh the comprehensive tax burden—including not only capital gains tax but also the Comprehensive Real Estate Tax—in advance before deciding whether to sell or hold onto the property.
Strict Comparison of the Practical Benefits of Joint Ownership for Married Couples
You must prepare by clearly distinguishing the deduction limit structures for the Comprehensive Real Estate Tax and Capital Gains Tax. While converting to joint ownership between spouses may still be effective in lowering the tax base for the Comprehensive Real Estate Tax, the long-term residency income deduction limit for capital gains tax (1 billion won) is scheduled to be restricted per house (property) rather than per person, so you must carefully compare the initial costs of gift and acquisition taxes with the amount of tax saved.
Preliminary check of criteria for recognizing non-residential exceptions
The tax gap between owner-occupiers with a single primary residence and non-residents or multi-home owners is expected to widen significantly. You must minimize tax risks by thoroughly reviewing in advance whether you qualify for exceptions to non-resident status recognized under tax law, such as working in a provincial area, children's education, or medical treatment.
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