This Year’s Official Land Price Realization Rate at 66%... Raised to Two-Thirds

▲ (Source=Ministry of Land, Infrastructure and Transport)

[Asia Economy Reporter Lee Chun-hee] The average realization rate of this year's publicly announced land prices was found to be 65.5%. This means that the realization has reached about two-thirds of the market price.

The Ministry of Land, Infrastructure and Transport announced on the 12th that it will disclose the prices of 500,000 standard land parcels as of the 1st of last month on the 13th. The publicly announced land prices released this time were calculated according to the '2020 Real Estate Price Announcement and Public Price Reliability Enhancement Plan' announced by the government in December last year. The key point of this plan is to introduce a separate 'α value' to improve the realization rate.

This year's publicly announced land prices were calculated by multiplying the market price at the end of last year, based on related data, by the sum of last year's realization rate and the α value. Here, the α value was calculated by dividing the shortfall by 7 for lands whose realization rate last year did not reach 70%. For example, if the realization rate of a land was 65% last year, it was adjusted so that this year's realization rate would be 66%.

Accordingly, the realization rate of the entire standard land prices this year was found to be 65.5%. This is an increase of 0.7 percentage points compared to 64.8% last year.

In particular, the increase was significant for residential land and forest land. The realization rate of residential land rose by 1.1 percentage points from 63.7% last year to 64.8% this year. Forest land also showed a similar increase from 61.6% to 62.7%. The land with the highest realization rate was commercial land, which increased by 0.5 percentage points to 67%. Although forest land showed the highest increase, its realization rate remained the lowest at 62.7%.

The government has been continuously raising the realization rate recently. The realization rate of 220,000 standard single-family houses nationwide, announced on the 23rd of last month, was 53.6%, up 0.6 percentage points from 53.0% last year.

In this process, while the overall average increase rate of publicly announced prices was 4.47%, the increase rate for houses priced between 900 million KRW and less than 1.5 billion KRW was about twice as high. Houses priced between 1.2 billion KRW and less than 1.5 billion KRW showed a double-digit increase rate of 10.1%, the only category to do so, followed by houses priced between 900 million KRW and less than 1.2 billion KRW, which rose by 7.9%.

The concentration of price increases in this range, similar to the standard publicly announced land prices, was due to a separate 'α value' adjustment. The Ministry of Land, Infrastructure and Transport had announced in December last year’s 'Public Price Reliability Enhancement Plan' that it would focus on realizing the public prices of high-priced houses over 900 million KRW.

Due to this adjustment, the tax burden on houses in this range is expected to increase significantly this year. According to the Ministry's simulation of holding taxes on standard single-family houses, the tax burden for owners of single-family houses with publicly announced prices over 900 million KRW will increase by more than 20%. For example, the holding tax burden of a single-family house owner in Gangnam-gu, whose publicly announced price rose by 8.3% from 1.06 billion KRW last year to 1.148 billion KRW this year, will increase by 24% compared to last year.

Similarly, a single-family house in Yongsan-gu, Seoul, which had a publicly announced price of 857 million KRW last year, will see its tax increase by 21% this year. The publicly announced price rose by 10.4% to 946 million KRW, and the holding tax will increase from 2,432,000 KRW to 2,942,000 KRW, about 500,000 KRW more.