Gap between single-home and multi-home comprehensive real estate tax to widen next year

The gap in comprehensive real estate tax — known in Korean as jongbusae — between single-home owners and those holding three or more properties is set to widen further starting next year. From 2028, the difference in basic deduction amounts will exceed the current 300 million won ($211,000), and owners of three or more homes will face a fair market value ratio 10 percentage points higher than the 70 percent applied to single-home owners.

Even as tax rates are unified across housing counts, the gap arising from differences in how the tax base is calculated appears unlikely to narrow significantly.

According to academics, the current difference in comprehensive real estate tax between a single-home owner and a three-home owner starts at around 200,000 won when the combined market value of apartments reaches 1.4 billion won, and grows as values rise.

These figures are calculated before property tax, holding-period and age deductions, and without applying the tax burden cap. For three-home owners, the figures are based on the combined market value of all properties held.

At a combined market value of 2 billion won, a three-home owner pays 900,000 won more in tax under the same conditions. The gap widens to 1.57 million won at 3 billion won, 1.8 million won at 4 billion won, 4.65 million won at 5 billion won, and reaches 15.88 million won at 8 billion won.

Once the tax reform package takes full effect in 2028, the gap will generally be larger than it is today until combined market values reach just over 10 billion won, at which point it begins to narrow. The tax bill for three-home owners will also be higher than under the current system across the board. This emerges from an analysis across four scenarios based on the number of homes owned and whether the owner resides in the property.

In the first scenario — where neither the single-home owner nor the three-home owner lives in any of their properties — the tax gap in 2028 would be 5.99 million won at a market value of 2 billion won, 7.67 million won at 3 billion won, and 25.86 million won at 8 billion won. The gap does not narrow below current levels until the market value reaches 13.4 billion won.

In the second scenario — a resident single-home owner versus a three-home owner who lives in one of the three properties — the gap does not begin to narrow below current levels until the market value reaches 14.8 billion won.

Compared with the first scenario, where neither party is a resident, the tax gap is smaller up to a market value of 2 billion won but becomes larger from 2.1 billion won onward.

This structure holds even when values are examined up to 30 billion won, because single-home owners benefit far more from the reduction in the tax base that comes with residency.

In the third scenario, owning three homes and living in one still leaves the owner worse off than a non-resident single-home owner. The tax gap stands at 5.01 million won at a market value of 3 billion won, 9.05 million won at 4 billion won, 10.43 million won at 5 billion won, and widens to 24.76 million won at 9.4 billion won — only narrowing below current levels once the value reaches 9.5 billion won.

In the fourth scenario — a non-resident three-home owner versus a resident single-home owner — the market value at which the tax gap falls below current levels is 15.8 billion won.

Single-home owners receive a basic deduction of 1.4 billion won if they are residents, or 900 million won if they are not. For multi-home owners, the basic deduction is calculated as 400 million won plus 500 million won multiplied by the ratio of the owner-occupied home's value to the combined value of all properties held.

The deduction amount varies depending on what share of the combined property value the owner-occupied home represents. In this analysis, a person living in one of three homes is assumed to reside in a property worth one-third of the combined total.

Under the reform, the government unified the previously two-tier tax rate structure — 0.5 to 2.7 percent for one- and two-home owners, and 0.5 to 5.0 percent for those with three or more — into a single 0.5 to 5.0 percent scale based on the assessed value of the properties.

The government said the change was aimed at promoting "tax equity," citing widespread criticism that owners of three homes each worth 1 billion won faced a far heavier tax burden than owners of three homes each worth 3 billion won.

In addition, the reform replaces the holding-period criterion in the existing deduction — which allows up to 80 percent off the tax bill for single-household owners based on how long they have held the property and their age — with a residency-period criterion, and introduces a monetary cap of 6 million won (8 million won in 2027).

Single-home taxpayers who previously benefited from the uncapped 80 percent deduction may see the gap between their tax bill and that of three-home owners narrow after the reform.

For those whose deductions were not large to begin with, however, the tax gap between single-home and three-home owners is unlikely to close significantly under the new system, raising questions about how fully the goal of tax equity can be achieved.

A government official said the reform reflected expert opinions gathered at forums and other discussions, and was the result of combining multiple factors, including the difference in fair market value ratios applied to multi-home owners.

"One of the main reasons people prefer putting all their money into a single prime property is the deduction," the official added. "For high-value single-home owners who previously received an 80 percent tax deduction, the introduction of a monetary cap this time will narrow the gap with three-home owners compared with before."