Editorial: Lee's Property Tax Comparison Overlooks Korea's Steep Transaction Taxes

President Lee Jae-myung on Saturday shared an article on X (formerly Twitter) comparing housing property tax rates internationally, writing "I was curious about this too." He posted the comment after linking an article titled "How Do Property Taxes in Major Cities of Advanced Countries Compare with Korea's?" The remark sparked widespread speculation. At a Cabinet meeting the same day, President Lee said, "The worst problem facing Korea is real estate speculation," adding, "If we leave real estate speculation unchecked, the country will collapse."

The article shared by the president showed that property tax rates in New York (1.0%), Tokyo (1.75%), and Shanghai (0.4–0.6%) are all higher than Korea's effective property tax rate of 0.15%. Earlier, Land, Infrastructure and Transport Minister Kim Yun-deok also revealed that the government is preparing property tax reform measures covering ultra-high-value properties and non-resident single-home owners. President Lee's reference to property taxes could therefore be read as signaling forthcoming tax reform.

Indeed, Korea's effective property tax rate of 0.15% — encompassing property tax and the comprehensive real estate tax — falls short of the Organisation for Economic Co-operation and Development (OECD) member average of 0.33% (2022–2023). However, it would be hasty to judge whether taxes should be raised based on a simple rate comparison alone. A recent report by the Korea Institute of Local Finance pointed out that housing accounts for a significant portion of middle-class household assets, meaning property tax hikes could negatively affect income distribution among the middle class. In other words, raising property taxes to stabilize home prices could inadvertently create tax regressivity.

Korea's abnormally high transaction taxes also deserve scrutiny. According to a research report commissioned by the National Assembly Budget Office, transaction taxes — including acquisition tax and capital gains tax — accounted for 5.1% of gross domestic product (GDP) in Korea, overwhelmingly higher than the OECD average of 0.8%. While the figure includes securities-related tax revenue, real estate-related taxes account for a disproportionately large share of transaction taxes in Korea. Moreover, concerns persist that if the government raises property taxes while leaving high transaction taxes untouched — as the Moon Jae-in administration did — it could worsen housing instability through locked-up housing inventory and the passing of tax costs onto tenants through higher jeonse (lump-sum deposit lease) and monthly rents. The government's commitment to real estate stability is understandable, but demand suppression through tax pressure has its limits. A virtuous cycle of housing supply driven by active market transactions is the fundamental solution to housing stability.