Lee Seung-heon, regarded as a frontrunner to become the next governor of the Bank of Korea, told an interviewer on February 6 that stronger taxes on property ownership are necessary to restrain a rally in home prices that could stoke inflation. At the same time, he said it would be premature to pivot the central bank riefly to additional monetary tightening.
Lee, who formerly served as senior deputy governor at the central bank and is considered a potential successor to Governor Rhee Chang-yong - whose four-year term ends on April 20 - framed housing measures as a fiscal and regulatory lever to contain price pressures without immediate moves on interest rates.
"When it comes to property market policies, I dont think its possible to stabilise the market unless the cost of owning homes actually increases by raising property ownership taxes, for instance," he said. He warned that continued gains in housing could "reignite inflationary pressure and prevent middle-class families from buying their own homes."
On monetary policy, Lee urged caution. He said there is no need right now to tighten policy and described it as "a bit too early" to signal possible interest rate increases. "Growth is still a bit weak. We need to gain momentum here so I9d say the market is moving too quickly. While the direction may be right, I think its too hasty," he added, referencing recent advances in three-year treasury yields which reached a 19-month high last week.
Policy context
The Bank of Korea has shifted to a neutral stance after implementing four rate cuts since October 2024, a change driven by a weaker Korean won alongside rising apartment prices in Seoul that pushed policymakers toward a greater focus on financial stability. The central bank left its benchmark interest rate at 2.50% for a fifth meeting on January 15.
Market expectations for the policy rate have been adjusting: the yield on three-year government bonds, used as a gauge of such expectations, has been climbing steadily from the middle of last year as traders reduced bets on further monetary easing.
Economic undercurrents
Lee also addressed the exchange rate. With the Korean won trading at 1,465.30 per dollar, he said the currency is "where it should be." He described a "natural range" for the won as "somewhere between 1,400 and 1,470 for now," and warned that weakness beyond 1,450 would likely reflect anxiety tied to external uncertainties. He noted that the currency could "temporarily breach 1,500 per dollar but I dont think such a level would be sustainable."
On the trade side, Lee pointed to strong semiconductor exports supporting the economy. He said demand for AI-driven memory chips has been bolstering corporate earnings and domestic investment, helping to shield South Koreas status as Asias fourth-largest economy from the effects of higher U.S. tariffs.
Experience and immediate challenges
During his previous tenure at the central bank, Lee worked on currency policy and represented the bank in discussions with counterparts such as the U.S. Federal Reserve and the International Monetary Fund. One of the early issues he would likely confront if appointed is the rising cost of homeownership.
Lees advocacy for higher property ownership taxes aligns with recent public comments from President Lee Jae Myung, who has urged holders of multiple homes to sell ahead of possible increases in real estate taxes. The candidate and the president share a concern about ownership costs: while South Korea already levies exceptionally high stamp duties and capital gains taxes on property sales of more than 60%, its regular ownership levies are comparatively low.
Outlook
Lees stance separates tools to tame housing demand from immediate monetary tightening. He argues fiscal and tax measures aimed at increasing the cost of owning property should be the first line of defense against a housing rally that could imperil price stability and access to homeownership for middle-income households, while keeping interest rates steady until growth shows clearer strength.