Following the announcement of the Lee Jae-myung government’s ‘October 15 real estate measures,’ public sentiment worsened, prompting the Democratic Party of Korea and the Rebuilding Korea Party—both classified as pro-government factions—to propose conflicting solutions. Cho Kuk, emergency committee chairman of the Rebuilding Korea Party, stated on October 20, “I will speak without hesitation: stabilizing the housing market takes precedence over the (June 2026) local elections, and failure to stabilize the market means no chance for regaining power.” He criticized apartment prices, particularly in Gangnam, as abnormal, and proposed three alternatives: ① constructing high-quality, ultra-high-rise public rental apartment complexes in Gangnam, ② encouraging multiple homeowners to sell their properties, and ③ normalizing holding taxes while easing transaction taxes. He also argued that excessive, capital gains tax reduction, benefits for “smart single homes” should be reduced.
The following day, October 21, the ruling Democratic Party launched a Housing Market Stabilization Task Force (TF). Han Jeong-ae, policy committee chairperson of the Democratic Party and head of the TF, pledged to prepare detailed regional housing supply plans by year-end but drew a line on discussing tax reforms advocated by Cho Kuk. Kang Yu-jung, presidential office spokesperson, also stated, “I understand no official discussion on tax reforms has emerged from the government yet.”
The real estate market views financial measures as already implemented and supply measures as long-term (over 10 years), making tax measures inevitable to quickly curb excess demand. However, why are the tax policies proposed by Cho Kuk absent from the Democratic Party and presidential office’s announcements? Experts attribute this to the unique nature of tax policies and differing election strategies between the two factions.
It Takes Three Years to Reduce Tax Resistance
Government and Bank of Korea economic policies broadly fall into three categories: ① tax policies that collect funds, ② fiscal policies that utilize collected funds, and ③ monetary policies (interest rate adjustments) that regulate money supply. These policies differ in the time required to show effects.
Fiscal policies, such as issuing traditional market vouchers, take effect within six months. The Bank of Korea’s monetary policies (rate hikes or cuts) show results after 6–9 months. Tax policies, however, take about three years to stabilize as taxpayers adjust.
For instance, housing is taxed at acquisition (acquisition tax), holding (property tax and comprehensive real estate tax), and transfer (capital gains tax) stages. Acquisition and capital gains taxes are paid once during transactions, while property taxes (July and September) and comprehensive real estate taxes (December) are annual. Taxpayers feel the impact of tax hikes when comparing tax bills to their bank balances. Resistance peaks in July, September, and December when property taxes rise. A tax policy expert noted, “The backlash is strongest not from slight increases in existing taxes but from new taxes imposed due to rising home prices. This is the primary consideration when reforming housing-related taxes.”
Tax resistance is highest in the first year, eases slightly the next, and is generally accepted by the third year. This means new tax systems stabilize after three years, influencing buyers’ and sellers’ decisions as they anticipate sustained tax burdens.
Worrying About Elections Three Years Later
The major elections facing President Lee Jae-myung and the pro-government factions are the June 2026 local elections, April 2028 general elections, and April 2030 presidential elections. How would immediate tax hikes affect these elections?
Property taxes, levied in July and September, could only be increased by mid-2026. Comprehensive real estate taxes, paid in December, are impractical to raise this year due to administrative delays. Thus, holding tax hikes would take effect next year, triggering resistance in mid-2026 and mid-2027. While the local elections in mid-2026 might pass without major impact, the 2028 general elections could suffer. However, if taxes are raised next year, the system would stabilize by 2030, avoiding resistance during the presidential election.
Unlike holding taxes, acquisition and capital gains taxes take immediate effect. For example, reducing tax breaks for “smart single homes” would impact the 2026 local elections. However, implementing such measures now would allow the new system to stabilize by 2027, avoiding effects on the 2028 general and 2030 presidential elections. In summary, tax reforms this year would harm the general elections if holding taxes rise, and the local elections if acquisition or capital gains taxes increase.
Different Calculations by the Democratic Party and Rebuilding Korea Party
Political experts analyze that the presidential office and Democratic Party aim to avoid tax resistance, win the 2026 local elections, and carry that momentum to the general and presidential elections. Their strategy focuses on supply policies to prevent further price hikes instead of tax increases. Experts predict the government and ruling party will either avoid announcing tax measures or implement minor adjustments under market pressure. They are prioritizing the imminent local elections over addressing the issue decisively.
Cho Kuk, however, insists, “Housing market stability precedes the local elections.” He advocates not only reducing capital gains tax breaks for high-value homes (affecting the local elections) but also strengthening holding taxes (impacting the general elections). His approach prioritizes early implementation of strong housing stabilization policies, including tax reforms, to secure a presidential election victory in 2030 despite potential setbacks in the local and general elections. This strategy is rooted in the painful experience of the Moon Jae-in administration, which failed to act preemptively, raised taxes abruptly before the presidential election, and faced tax resistance that cost them power.
