An aerial view of a mixed residential area in Gangnam, Seoul, showing apartments and multi-family housing [Yonhap]
An aerial view of a mixed residential area in Gangnam, Seoul, showing apartments and multi-family housing [Yonhap]

Some 328,000 people switched from owning multiple homes to a single home in 2021 — the year the effective tax rate gap between multi-home and single-home owners under the comprehensive real estate tax, or jongbusae, was at its widest, according to a new analysis. The findings suggest that the current jongbusae system, which imposes sharply higher tax burdens based on the number of homes owned, has fueled the so-called "one premium home" phenomenon, in which owners concentrate their assets in a single high-value property to avoid multi-home surcharges. The report calls for restructuring the holding tax around asset value rather than the number of homes, and for scaling back deductions and exemptions for expensive single-home owners.

The Nara Salim Research Institute analyzed jongbusae effective tax rates and housing ownership structures from 2015 to 2024 using data from the National Tax Service and Statistics Korea. The results, released Thursday, show that in 2021 — when the 2020 jongbusae overhaul took full effect — the effective tax rate for multi-home owners rose to 1.21 percent, more than double the previous year's 0.59 percent. For single-home owners, the rate rose only modestly, from 0.30 percent to 0.50 percent over the same period. As a result, the gap between the two groups widened from 0.29 percentage points in 2020 to 0.71 percentage points in 2021 — the largest disparity recorded during the study period.

The divergence reflects the direction of the tax reforms at the time. The top rate for multi-home owners was raised to 6 percent and the cap on annual tax increases was expanded to as much as 300 percent. Single-home owner-occupiers, by contrast, saw their basic deduction threshold raised from 900 million won ($610,000) to 1.1 billion won, while the combined ceiling on tax credits for elderly owners and long-term holders was lifted to 80 percent. Subsequent reforms partially eased the multi-home surcharge, but the basic deduction for single-home owners was expanded further, to 1.2 billion won.

The core finding of the analysis is that this structure — in which owning multiple homes of similar total value triggers higher rates, while concentrating assets in one property unlocks generous deductions and credits — has actively incentivized the "one premium home" strategy. The report warns that as long as the tax system continues to favor expensive single-home ownership, asset concentration in high-value properties to avoid multi-home penalties is likely to continue.

Actual ownership data bear out the trend. In 2021, when the tax rate gap was at its peak, the number of single-home owners nationwide rose by 438,936 from the previous year, while the number of multi-home owners fell by 46,393. An individual-level analysis of ownership histories found that 328,000 people moved from multiple homes to a single home between 2020 and 2021, outpacing the 283,000 who went in the opposite direction by 45,000. It was the only year in the past five in which the flow from multiple homes to single ownership exceeded the reverse.

The shift was even more pronounced in Seoul. While the number of multi-home owners fell 2.0 percent nationwide in 2021, Seoul saw a 3.83 percent decline — well above the national average. The report attributes the steeper drop to the fact that all of Seoul has been designated a regulated zone since 2017, meaning the city was exposed to multi-home surcharges earlier and more severely than other regions.

The report cautions, however, against attributing the changes solely to the jongbusae overhaul. Revisions to acquisition taxes and capital gains taxes around 2020, tighter lending regulations and rising home prices all played a role simultaneously. The analysis is also limited by the fact that the National Tax Service's jongbusae statistics by number of homes held do not distinguish between individuals and corporations, making it difficult to isolate the effects of the individual multi-home surcharge from the tightening of corporate property taxation.

The report warns that if the current system remains in place, assets will continue to flow into high-value homes in the Greater Seoul area to avoid multi-home penalties, adding upward pressure on prices. It recommends restructuring the holding tax so that liability is based on the value of assets held rather than the number of homes, and gradually reducing deductions and exemptions for owners of expensive and ultra-expensive single homes.

The government is also reviewing a broader real estate tax overhaul that would include adjusting the tax burden on high-value single homes.

President Lee Jae Myung chaired a national public forum on real estate Thursday to discuss ways to curb unearned gains from property and rein in speculative demand. The government is considering maintaining its principle of protecting owner-occupiers of a single home while raising the holding tax burden on ultra-high-value single properties and revising the capital gains tax to reward actual residence over passive ownership. The administration plans to announce a tax reform package by the end of this month, following a public consultation process, and to release additional housing supply measures next month.


fact0514@heraldcorp.com