[Editorial] Resuming Heavy Capital Gains Tax on an Already Stalled Housing Market Will Worsen the Transaction Cliff

The Entrenchment of the “One Smart Home” Phenomenon Will Further Distort the Housing Market

Major countries overseas ensure market mobility by easing transaction taxes, such as low capital gains taxes (U.S.) and cuts to acquisition taxes (U.K.)

Korea, a country that imposes high real estate transaction taxes, is moving against the global standard

Recently, President Lee Jae-myung reaffirmed the end of the temporary suspension of heavier capital gains taxation for multi-homeowners. This raises concerns that, in a real estate market already at a standstill, the policy will only deepen the transaction freeze and further drive up housing prices in Gangnam.

In October 2025, land transaction permit zones and owner-occupancy requirements were added. The government expects these measures to bring more listings onto the market and stabilize prices, but the real estate market has already lost its normal transactional function. With loan regulations piled on as well, both selling and buying have been blocked. In such a market, what emerges is not price adjustment but the disappearance of transactions.

When the heavier capital gains tax for multi-homeowners is applied, the effective tax rate exceeds 80%. A transaction tax at this level does not induce people to sell. Rather, it reinforces the perception that selling means taking a loss, leading people to choose to hold onto their properties instead.

This policy direction further entrenches the so-called “one smart home” phenomenon. The more regulations on multi-homeowners and punitive taxation are repeated, the more the market responds by reducing the number of homes held. Rather than owning several homes, it becomes rational to concentrate on the single safest one.

The stronger the regulations become, the more downward rigidity in Gangnam housing is reinforced. Heavier capital gains taxation and strengthened holding taxes do not increase housing listings in Gangnam. They only lock up listings instead. The stricter the taxes become, the less reason there is to sell a home in Gangnam. It is a natural response for capital to concentrate in areas with low downside price risk. Gangnam is an area that meets all of these conditions.

As a result, the price gap between regions widens. A policy that simultaneously strengthens holding taxes and transaction taxes further intensifies this concentration. When mobility is blocked, asset holders remain in the most stable areas. This is why policies intended to curb housing prices in Gangnam end up propping them up instead.

The cost is then passed on to end-users. When transactions are blocked, moving homes or trading up becomes difficult. Demand that cannot be absorbed in the home sales market shifts to the jeonse and monthly rental market. When regulations and taxes on rentals are strengthened, supply declines. Jeonse and monthly rent prices have no choice but to rise.

Major countries overseas avoid this kind of policy mix. The United States has relatively low capital gains tax rates and encourages transactions through long-term holding deductions. The United Kingdom has promoted housing mobility by lowering acquisition taxes. Germany maintains holding taxes but does not excessively raise the burden of transaction taxes. France likewise keeps transaction taxes low to ensure market mobility.

What these countries have in common is that they avoid tax systems that block transactions. This reflects the recognition that prices can adjust only when movement and resource reallocation are possible. Korea is already a country with a high share of transaction taxes, yet it is moving in the opposite direction by raising them at a time when they should be lowered.

The Center for Free Enterprise (CFE) believes that the solution to stabilizing the real estate market does not lie in strengthening taxes. What is needed is the normalization of the transaction structure. To lower housing prices in Gangnam, the incentives driving concentration into Gangnam must be removed. To do so, capital gains taxes and acquisition taxes must be eased. At a time when the supply of new apartments has been halted, housing mobility and the ability to trade up must be made possible so that existing apartments can be supplied to the market more quickly.

Regulations should be minimized and limited by region and type. Discussion of holding taxes is also unlikely to be effective unless it is pursued in parallel with the easing of transaction taxes. If more taxes and regulations are added to a market that has already come to a standstill, only the transaction freeze will worsen, and housing prices in Gangnam will become even more rigid.

The price will be paid by actual homebuyers, by jeonse and monthly rental tenants without homes, and by the younger generation. What is needed now is not punitive or penal taxation. What is needed is a policy shift that opens the way for the market to move again, beginning with the easing of transaction taxes in line with the global standard, including abolishing the heavier capital gains tax on multi-homeowners and easing acquisition taxes.

2026. 1. 26.

Center for Free Enterprise (CFE)

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Original title: [논평] '이미 멈춰 선 부동산 시장’, 양도세 중과 재개로 거래절벽과 강남 집값 상승 가속할 것

Author: Center for Free Enterprise (CFE)

Date: 2026-01-26

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=comment&pn=1&idx=28546