'Single-family homes worth over 900 million won' property tax soars... Pay at least 20% more

Announcement of Nationwide Single-Family Home Official Prices... Average Increase of 4.47%
Focus on Realistic Pricing for High-Value Homes... Adjustment with 'α Value' for Homes Over 900 Million Won
Minimal Increase in Tax Burden for Low-Value Homes

[Asia Economy Reporter Lee Chun-hee] Following loan regulations, property tax has also become a target of government policy for 'high-priced homes exceeding 900 million KRW.' The property tax burden on high-priced detached houses and apartments is expected to increase by up to 50% this year.

According to the Ministry of Land, Infrastructure and Transport on the 23rd, the official prices of 220,000 standard detached houses nationwide announced this year rose by an average of 4.47%, with the highest increase rate seen in homes priced between 900 million KRW and less than 1.5 billion KRW. Homes priced between 1.2 billion KRW and less than 1.5 billion KRW rose by 10.1%, the only double-digit increase, followed by homes priced between 900 million KRW and less than 1.2 billion KRW, which saw a 7.9% increase in official prices.

The concentration of official price increases in this range is due to a separate 'adjustment' made under government policy. In December last year, the Ministry announced through the 'Plan to Enhance the Reliability of Official Prices' that it would focus on realizing the official prices of homes priced over 900 million KRW. If the realization rate compared to market prices is low, an additional 'α value' is added to the market price change rate to raise the existing realization rate. The Ministry set a target realization rate of 55% for standard detached houses.

As a result, the realization rate for homes priced between 1.2 billion KRW and less than 1.5 billion KRW rose by 3.1 percentage points from last year to 53.7%, and the rate for homes priced between 900 million KRW and less than 1.2 billion KRW increased by 2.0 percentage points to 53.4%. A Ministry official explained, "The realization rate for homes priced between 900 million KRW and 1.5 billion KRW, which was lower than that of mid-to-low-priced homes, has increased, resolving the average reversal phenomenon between mid-to-low-priced and high-priced homes."

However, due to this adjustment, the property tax burden for homes in this range is expected to increase significantly this year.

According to the Ministry's simulation of property tax on standard detached houses, the tax burden for owners of detached houses with official prices over 900 million KRW is expected to rise by more than 20%. For example, a detached house owner in Gangnam-gu whose official price rose from 1.06 billion KRW last year to 1.148 billion KRW this year (an 8.3% increase) will see a 24% increase in property tax burden compared to last year. Similarly, a detached house in Yongsan-gu, Seoul, with an official price of 857 million KRW last year, will see a 21% increase in tax this year. The official price rose by 10.4% to 946 million KRW, and the property tax amount increased from 2,432,000 KRW to 2,942,000 KRW, about 500,000 KRW more.

On the other hand, for low-priced homes, even if the official price rises, the increase in tax burden is expected to be minimal. For example, a detached house in Seongdong-gu, Seoul, priced at 302 million KRW last year, will see its tax burden increase from 581,000 KRW to 618,000 KRW, a rise of 37,000 KRW (6.4%). This is because the official price this year is about 316 million KRW, a 4.6% increase, and it is not subject to comprehensive real estate tax.

A larger increase in property tax is scheduled for March. This is because the Ministry plans to apply the α value to the official prices of apartments scheduled to be announced in March. The Ministry especially plans to raise the realization rate to 80% for apartments priced over 3 billion KRW. Applying last year's realization rate of 69.2%, the official price of a 3 billion KRW apartment is expected to rise from 2.076 billion KRW in 2019 to 2.4 billion KRW this year, an increase of over 300 million KRW.

According to estimates released by the Ministry, the official price of an 84㎡ (exclusive area) unit in Eunma Apartment, Daechi-dong, Gangnam-gu, based on last year's market price, is expected to rise from 1.152 billion KRW last year to 1.763 billion KRW this year, a 53% increase. Property tax will also surge by 50%, from 4.2 million KRW to 6.3 million KRW. The official price of an 85㎡ unit in Raemian Daechi Palace, Daechi-dong, will rise by 42.1% to 2.138 billion KRW, with property tax increasing by 50% to 10.43 million KRW. The burden on multi-homeowners subject to heavy comprehensive real estate tax will be much greater. If one owns both apartments simultaneously, the property tax to be paid will soar from 30.48 million KRW last year to 65.59 million KRW this year, more than doubling.