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March 20 (Asia Today) — This commentary is the Asia Today Editor’s Op-Ed.

With Seoul apartment values posting their biggest increase in five years, concerns are growing that a heavier property tax burden will spill into the Jeonse and monthly rental markets. Jeonse is a unique Korean housing lease system where tenants pay a large lump-sum deposit instead of monthly rent, and get it back at the end of the lease.

Landlords are already showing signs of passing higher holding costs on to tenants through steeper rents and larger Jeonse deposits. If the government now moves to raise taxes further, including on single-home owners whose properties are deemed non-residential, it risks worsening instability in the rental market.

According to the Korea Real Estate Board, Seoul apartment Jeonse prices rose for a 57th straight week as of the second week of March, with the cumulative increase reaching 4.79%. Monthly rents climbed even faster. In February, the average monthly rent for an apartment in Seoul stood at 1.515 million won, or about $1,010, up 12.5% from a year earlier.

The sales market, by contrast, has cooled. Apartment prices in Seoul’s three Gangnam districts and Yongsan-gu have fallen for four consecutive weeks. But the Jeonse and monthly rental markets are becoming more unstable as new apartment supply shrinks and listings for existing units tighten. The shortage has been aggravated by the reinstatement in May of a capital gains tax surcharge on owners of multiple homes.

Against that backdrop, higher officially assessed home values are likely to add even more upward pressure on rents. The Ministry of Land, Infrastructure and Transport said this year’s official values for multifamily housing in Seoul rose 18.67% from a year earlier. That was the third-largest increase on record, behind only 2007 and 2021, both periods of sharp home-price gains.

In the three Gangnam districts and the Mapo-Yongsan-Seongdong area, where assessed values climbed more than 20%, many homeowners could see property tax bills rise by more than 50%. Even without a revision to tax law, the annual burden can increase by as much as 50%. Once local education taxes and the rural special tax are included, the actual increase can be even greater.

The number of single-home owners subject to the comprehensive real estate tax also rose sharply. Homes assessed above 1.2 billion won, or about $800,000, now total 487,362, up 170,000 from a year earlier.

For many elderly homeowners living on national pension payments, interest income or dividends, annual property taxes running from several million won to tens of millions of won can be difficult to absorb. Assessed values are also used to calculate regional health insurance premiums and can affect existing pension burdens, making the overall impact even heavier.

South Korea has already seen what happens when landlords shift tax costs onto tenants. During the previous progressive administration, rising tax burdens contributed to sharp increases in monthly rents and Jeonse deposits. Past data show that when the property tax rate rises by 1 percentage point, about 30% of the additional burden is passed on through Jeonse deposits and roughly 40% to 50% through monthly rent.

Even so, the government is considering higher property taxes or smaller long-term holding deductions to curb what it calls high-value single-home investments used for non-residential purposes. But real estate taxation can have broad collateral effects. If efforts to suppress housing prices go too far, tenants may once again end up paying the price.

The government should scrap any reckless plan to raise property tax rates on single-home owners.

— Reported by Asia Today; translated by UPI

© Asia Today. Unauthorized reproduction or redistribution prohibited.

Original Korean report: https://www.asiatoday.co.kr/kn/view.php?key=20260319010005978

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