As the South Korean government’s temporary pause on high capital gains taxes for multi-home owners is set to end on May 9, attention is turning to how the housing market will react.

In South Korea, people who own two or more homes in certain areas face much higher taxes when selling property. The rule was introduced to curb real estate speculation but has also increased the burden on multi-home owners and discouraged transactions. To prevent a market freeze, the government has applied standard tax rates since 2022, allowing sellers to avoid heavy tax penalties. However, it was decided not to extend the policy further. LEE Jae Myung, the president of Korea, said the deadline will remain unchanged, though a short grace period may be allowed for contracts signed before the policy expires to account for delays in closing deals.

Experts expect a short-term increase in listings as owners rush to sell before the tax benefits expire. This could temporarily boost the transaction volume of property. Afterward, however, transactions may decline as higher taxes discourage sales, potentially reducing the available housing supply. Despite the government’s aim to stabilize the market, activity may slow again after the deadline. The policy may also affect the rental market. While fewer home sales could keep more properties available for rent, landlords may also raise rents to offset rising tax burdens, increasing both deposit-based and monthly rentals.

In Seoul, rental supply and demand are becoming increasingly imbalanced. Monthly rent listings have fallen in 24 of 25 districts, with some areas seeing declines of over 40% in just two months. As supply tightens and demand becomes more concentrated, the average monthly apartment rent has risen to 1.51 million KRW, now exceeding 36% of the average worker’s income, adding to overall living cost pressures.

These trends are driven by structural factors, including landlords returning to live in their own homes, tenants renewing contracts, and a limited supply of new rental housing. However, experts warn that the return of higher taxes could intensify these pressures. If homeowners choose to hold onto properties rather than sell, or raise rents to cover increased tax costs, supply may shrink further while prices continue to rise. As a result, the policy may lead to reduced transactions and higher rental burdens, with renters likely to be most affected.