Capital Gains Taxation and House Price Growth: Evidence from the COVID-19 Era

Taeho Jung ; Jongsang Park

Taeho Jung, Financial Services Commission tthhjung@korea.kr
Jongsang Park (corresponding author), Associate Professor, Sookmyung Women’s University jsngpark@sm.ac.kr

JEL Classification: H24; R31; E52; G12

Abstract

This study investigates whether real estate capital gains taxation contributed to moderating housing price increases during the COVID-19 era of monetary expansion. We use the sample of 29 out of the total OECD countries from 2012 to 2022 and estimate Generalized Method of Moments (GMM) models to examine the relationship between capital gains taxes and housing price dynamics. Findings suggest that although recent tax reforms and higher relative tax burdens on real estate were associated with lower housing price growth during the COVID-19 pandemic, the effects were conditional on liquidity conditions. We specifically find that as M1 expanded, the mitigating effect of capital gains taxes diminished and was generally offset in an environment with aggressive monetary expansion. This research contributes to the literature by identifying this conditional effectiveness, showing that capital gains taxation alone does not appear to offset liquidity-driven housing booms and may even amplify short-term volatility. Lastly, findings highlight the importance of fiscal–monetary coordination during future expansionary episodes.

Keywords:

Capital gains taxation, Housing prices, Monetary expansion, Liquidity, COVID-19, OECD panel

Acknowledgments

The views expressed in this paper are those of the authors and do not necessarily reflect the official positions of any affiliated institutions or government agencies.

The authors thank the editor and the anonymous referee for their valuable comments. We also thank participants at the 2025 Seoul Journal of Economics International Conference for helpful suggestions.

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