South Korean President Lee Jae Myung's party achieved a broad election victory, but a key loss in Seoul presents a challenge to his reform agenda, particularly concerning real estate taxation.

South Korean President Lee Jae Myung’s ruling party swept most of the country’s major local elections, but a narrow defeat in Seoul has given conservatives a foothold to challenge his reform agenda. The loss in the capital, South Korea’s political and property-market centre, has taken the shine off an otherwise dominant performance by the ruling Democratic Party of Korea (DPK), dealing a blow to Lee’s plans for tougher real estate taxation, according to observers. Across the country, the DPK won...