'If property taxes rise, how much do we raise the rent?' — landlords rattled by tax reform plan

The real estate market has been unsettled since the government unveiled its tax reform proposal. Owners of high-priced homes are weighing whether to sell, while online real estate communities have been flooded with debate over how much monthly rent would need to rise to offset property tax increases of tens of millions of won. In the rental market, anxiety is mounting — some landlords are moving to convert jeonse (a lump-sum deposit lease) contracts to monthly rent arrangements, and others are signaling they will move into their properties once current leases expire.

Posts reflecting landlords' anxieties over the reform plan have been appearing in rapid succession on a popular real estate online forum — asking questions such as "If annual property taxes jump by tens of millions of won, how much monthly rent would I need to charge?" and "What should I do about capital gains tax?"

One user raised concerns, writing that it would be unrealistic to expect landlords alone to absorb a sudden property tax increase of tens of millions of won without passing it on to tenants, and that higher rents would be an inevitable result.

Others posted that monthly rents of 10 million won in Seoul could become a reality, and that while wages are not rising, rents could end up as expensive as in New York.

Posts seeking advice also poured in from owners asking whether they should sell their single high-priced home — their only asset after retirement.

Some analysts note that where rent increases are not feasible, landlords may respond by selling or moving in themselves, which could reduce the supply of rental properties on the market.

Real estate agents say inquiries from landlords have surged on the ground.

Agents at agencies in Seocho-gu and Gangnam-gu said the shock among high-priced home owners has been greater than expected. A licensed agent in Seocho-gu said calls come in dozens of times a day asking how much taxes will increase and whether to sell. The agent added that even long-term owner-occupiers who have lived in a single home for years are expressing worry that the property tax burden may become too heavy to bear.

A licensed agent in Gangnam-gu said frustration is particularly strong among non-resident single-home owners who expect their property tax burden to grow significantly, adding that even elderly long-term single-home owners are beginning to question whether to hold on to their properties.

One agency official said the first question landlords ask when they call is whether they can convert a jeonse contract to monthly rent, and that a significant number have said they plan to move in themselves once their tenants' leases end.

The concern is that as housing-related costs such as property taxes rise, landlords will try to offset some of the burden by adjusting rents. Conversely, if landlords who cannot absorb the tax increase choose to sell or move in themselves, the supply of rental properties could shrink.

Seoul apartment listings have in fact been rising again since the tax reform proposal was announced.

According to real estate big data firm Asil, the number of Seoul apartments listed for sale climbed from 60,409 on Monday to 62,516 on Sunday — an increase of 2,107 units, or 3.4 percent. The gains were particularly pronounced in the Gangnam area. Listings in Seocho-gu rose 6.1 percent over the same period, from 7,630 to 8,098, while Gangnam-gu saw a 5.0 percent increase, from 9,453 to 9,934.

Yeongdeungpo-gu also recorded a 4.7 percent rise, with Yongsan-gu up 4.5 percent and Gwangjin-gu up 4.2 percent.

Some market observers caution, however, that the uptick in listings should not be taken as a sign that a wave of mass selling has already begun. Until the specifics of the reform plan and the actual tax burden are finalized, they say, most landlords are still in a wait-and-see mode — running the numbers as they weigh whether to sell or hold.