Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol briefs President Lee Jae Myung on emergency state affairs and response measures related to the Middle East war at a Cabinet meeting held at Cheong Wa Dae on Tuesday. [Yonhap]
Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol briefs President Lee Jae Myung on emergency state affairs and response measures related to the Middle East war at a Cabinet meeting held at Cheong Wa Dae on Tuesday. [Yonhap]

Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol convened a private meeting with real estate experts ahead of a Greater Seoul housing supply plan set for announcement next week, asking them to diagnose why Seoul home prices keep rising despite a shrinking population, while also gathering views on market reactions to the recent tax reform and the direction of supply measures.

Experts identified stabilizing the jeonse and monthly rent market as the most urgent task among supply expansion measures, calling for eased financial and tax regulations on private rental operators and a broader push to develop corporate-style rental housing.

Koo held the closed-door session with five real estate experts at Government Complex Seoul on Thursday, gathering opinions on market conditions following the real estate tax reform package announced Monday and on the direction of upcoming supply measures.

Expressing concern over rising Seoul home prices, Koo asked the experts to explain why prices continue to climb even as the population declines. The experts said Seoul's housing supply has failed to keep pace with the rapid growth in single-person households and other forms of household fragmentation.

The dominant topic of the session was instability in the jeonse and monthly rent market following the tax overhaul. Participants said they broadly agreed with the intent to shift the tax system toward owner-occupancy, but warned that a combination of reduced tax benefits for rental businesses and tighter lending rules could lead to a drop in rental supply and a rise in jeonse and monthly rent prices.

"Ultimately, the jeonse and monthly rent market can only be stabilized by keeping rental operators alive — they are the ones who have been supplying rental units immediately," one participant said. "Tightening residency requirements and restricting loans to rental operators is shrinking supply in prime areas, yet the government lacks the perspective of managing this market in a stable way."

The participant added that incentives for private rental operators should be expanded and the rental market brought back into the formal sector. "Loan regulations on rental operators need to be eased, and corporate-style rental businesses should be actively cultivated," the participant said.

Apartment buildings in Seoul as seen from Namsan. [Yonhap]
Apartment buildings in Seoul as seen from Namsan. [Yonhap]

Participants also called for expanded financial and tax support for corporate rental operators. Given that a significant increase in new housing supply is difficult in the near term, they argued that the government should lay institutional groundwork to bring corporate rental housing and non-apartment rental units to market quickly.

Industry circles say financial and tax incentives are needed for corporate rental operators managing 100 or more non-apartment units. The Seoul Metropolitan Government recently submitted a proposal to the central government seeking related regulatory improvements. About 1,400 corporate rental units are currently being supplied in Seoul, centered on operators such as Mangrove.

Some experts proposed easing corporate lending restrictions to boost non-apartment supply and called for lifting regulations on certain quasi-residential zones within housing development districts where construction of multi-family housing is currently prohibited.

Concerns were also raised that apartment and non-apartment rental policies are somewhat out of step with actual residential demand. "Apartment rental businesses have already been largely deregistered, and non-apartment units are simply too scarce — it is not a matter of choice," one participant said. "Policy and reality are out of sync. The devil is in the details, and there are no details at all."

Experts also urged the government to retain the cooperative landlord tax exemption. Under the scheme, landlords who cap rent increases at 5 percent or less from the previous contract are exempt from the two-year residency requirement for the long-term holding deduction on a single home. The government, however, plans to let the exemption expire at year-end and to recognize existing benefits only for properties sold by the end of next year where cooperative lease contracts concluded by year-end.

The practical enforceability of the tax reform also came under scrutiny. One expert questioned how the government would administratively distinguish between owner-occupied and non-owner-occupied homes for tax purposes. "How do you separate residence from ownership in administrative terms?" the expert said. "Workarounds could emerge in officetels and similar properties — the question is whether the government intends to conduct a full audit of resident registration addresses." The expert also raised doubts about the real-world effectiveness of capital gains tax relief incentives for regional properties.

Another expert flagged the complexity of the tax system as a problem. "The system is so complicated it could leave ordinary people confused," the expert said. "There is even a term — 'yangpose' — that captures how reluctant tax accountants have become to advise on capital gains tax. Follow-up measures are needed to simplify the system so the public can understand it easily."

In response, Koo said the tax overhaul was not focused solely on raising taxes. He explained that the intent was to protect those who need it — such as single-home owner-occupants — while differentiating the tax burden based on non-owner-occupied properties and ultra-high-priced homes.


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