Reinstatement of heavy capital gains tax on multiple homeowners imminent, increasing volatility in the domestic real estate market

What Happened

According to a Yonhap News economic report on May 8, 2026, the capital gains tax surcharge system for multiple homeowners, which had been deferred for four years since 2022, will be reinstated starting May 10, two days later. With the reinstatement of the surcharge, if multiple homeowners sell homes in designated speculative areas, an additional 20 percentage points will be added to the basic tax rate for those owning two homes, and 30 percentage points for those owning three or more homes. Consequently, a 'last-minute purchase' sentiment to avoid the surcharge has spread, leading to a surge in renewal contracts in Seoul's jeonse and monthly rent market, and some multiple homeowners are putting out distressed sales, indicating market volatility. In response to this market volatility, the government is intensifying pressure on financial institutions regarding loans, aiming to curb household debt growth and stabilize the market. This, coupled with the increase in auction properties since April, is acting as a factor that increases overall downward pressure on the domestic real estate market.

Why It Matters

The revival of the capital gains tax surcharge system for multiple homeowners is a significant policy change that directly impacts the domestic real estate market. During the surcharge deferral period, multiple homeowners held onto their properties, exacerbating the market's 'locked-up' inventory phenomenon; however, now there is a possibility of increased property releases due to the tax burden. This could lead to an increase in distressed sales in the short term, exerting downward pressure on prices, but in the long term, the 'locked-up' inventory phenomenon could intensify again. The government's pressure on financial institutions regarding loans is interpreted as an intention to curb household debt growth and prevent overheating in the real estate market, but it could also lead to side effects such as dampening housing purchase sentiment and decreasing transaction volumes. These policy changes increase uncertainty in the real estate market, requiring a cautious approach from both end-users and investors.

Impact on the Korean Market

The revival of the capital gains tax surcharge will lead to a decrease in transaction volumes and increased price volatility in the domestic real estate market. The impact is expected to be particularly significant on the high-end housing market in designated speculative areas like Gangnam, Seoul. The construction industry may face difficulties due to an increase in unsold units and a reduction in new projects, which will burden not only large construction companies like Hyundai Engineering & Construction but also small and medium-sized ones. The financial sector may see increased concerns about the deterioration of real estate loan soundness, and coupled with a rise in household loan delinquency rates, the risk to the financial system could become prominent. Furthermore, there is a possibility that gifting among multiple homeowners will become more active. This could lead to a contraction in domestic consumption and a deepening of household debt issues in the Korean economy, potentially having a negative impact on overall economic growth. A hard landing in the real estate market could increase instability across the financial market.

Key Stock Analysis

Hyundai Engineering & Construction (000720): Real estate market stagnation will lead to a decrease in new orders for construction companies and an increase in unsold unit risks, which is negative for large construction companies like Hyundai Engineering & Construction. Deterioration in the profitability of housing projects is a concern. (sentiment: negative)
Samsung C&T (028260): As it operates a construction division, it may be affected by the real estate market. A contraction in the housing market could burden its performance and impose restrictions on pursuing new projects. (sentiment: negative)
Ssangyong C&E (003410): Construction material companies like Ssangyong C&E, which produce cement, are expected to see reduced demand due to a slowdown in the real estate construction market, which is negative. A decrease in construction projects directly leads to a decline in revenue and profit. (sentiment: negative)
Hanssem (009240): A decrease in housing transaction volumes will lead to reduced demand for furniture and interior design, negatively impacting Hanssem's performance. A vibrant housing sales market is a crucial factor for Hanssem's performance. (sentiment: negative)
KB Financial Group (105560): Real estate market stagnation and strengthened household loan regulations will lead to slower loan growth and concerns about deteriorating asset quality for banks, which is negative for KB Financial Group. In particular, the risk of non-performing mortgage loans may increase. (sentiment: negative)
Shinhan Financial Group (055550): Similar to KB Financial Group, a contraction in the real estate loan market could burden Shinhan Financial Group's profitability and asset quality. Managing the soundness of its loan portfolio will become crucial. (sentiment: negative)
KR10Y (Korea 10-Year Treasury Bond): Uncertainty in the real estate market and concerns about an economic slowdown could support the central bank's dovish monetary policy stance, potentially exerting downward pressure on long-term bond yields. This could increase the attractiveness of government bonds. (sentiment: positive)
Gold (GOLD): Instability in the domestic real estate market could heighten overall economic uncertainty, stimulating safe-haven sentiment. This could positively impact gold prices. (sentiment: positive)

Future Scenarios

Optimistic Scenario: Following the revival of the capital gains tax surcharge, multiple homeowners might release more properties onto the market than expected, and if these properties are absorbed primarily by end-users, the market could gradually stabilize. If real estate prices adjust to reasonable levels alongside government loan regulations, it could contribute to long-term market soundness. In particular, the stabilization of the jeonse market could also positively impact housing stability for ordinary citizens.

Pessimistic Scenario: Despite the capital gains tax surcharge, the 'locked-up' inventory phenomenon might persist, or a transaction cliff could deepen after distressed sales are exhausted. Furthermore, a hard landing in the real estate market cannot be ruled out, potentially leading to household debt defaults and financial system instability. Especially if a high-interest rate environment continues, the burden of loan repayments could increase, further raising delinquency rates in the real estate market. The government's future real estate policy direction, the possibility of interest rate cuts, and economic growth trends will be crucial variables. Investors need to carefully analyze market conditions by region and housing type and adopt a cautious approach. Continuous monitoring of household loan trends and construction companies' unsold unit risks is particularly important.