[2020 Individual Official Land Prices] Seoul Rises 8.25%... "Concerns Over Transfer of Holding Tax Burden to Rent" (Comprehensive)

Photo by Mun Ho-nam munonam@

[Asia Economy Reporters Yuri Kim, Donghyun Choi, Onyu Lim] The individual publicly announced land prices in Seoul rose by 8.25% compared to last year.

Seoul City announced on the 28th that it will finalize and publicly announce the individual publicly announced land prices for 880,827 parcels surveyed as of January 1 this year on the 29th. Of the target parcels, 856,168 parcels, accounting for 97.2%, increased in price. 16,670 parcels (1.9%) remained stable. This year’s increase rate of 8.25% was lower than last year’s 12.35%. Seoul City explained that "overall, the real estate market has remained stable, resulting in a moderate rise in land prices."

However, the 8.25% increase this year was the second highest since 2009, when the global financial crisis caused a -2.14% decline, following last year. Compared to the 3.35% to 6.84% increases recorded between 2014 and 2018, this year’s rise is also relatively high.

The significant rise in individual publicly announced land prices this year has drawn attention to how the burden of holding high-priced land taxes might affect the market. Although the increase in publicly announced land prices following last year was already expected due to the government’s policy to reflect actual real estate prices, concerns remain that the tax burden might be passed on to monthly rent prices. Professor Daejung Kwon of Myongji University’s Graduate School of Real Estate said, "Since monthly rent prices are already rising, there is a possibility that some of the additional tax burden from the land price increase could be passed on," adding, "However, as real estate prices themselves have recently remained slightly weak, even if some of the burden is reflected in rent prices, the impact will be minimal." He also expects the policy of reflecting actual prices in public announcements to continue. Professor Kwon added, "Since the government is in a situation where it needs to secure tax revenue, I believe the prices will continue to rise steadily."

Meanwhile, the individual publicly announced land prices in Seoul by district showed Seocho-gu with the highest increase at 12.37%, followed by Gangnam-gu at 9.93%, Seongdong-gu at 9.81%, and Seodaemun-gu at 9.09%. Seocho-gu recorded a double-digit increase rate for two consecutive years, following last year. Last year’s increase rate was 16.49%. Seoul City explained this as "a rise in land prices due to the reflection of apartment prices in Jamwon-dong and Banpo-dong." The government had previously announced plans to raise the rate of reflecting actual prices mainly for high-priced multi-family housing to address imbalances.

Following Seocho-gu, Gangnam-gu’s increase rate was high at 9.93%. Seoul City analyzed this as "the effect of price reflection for Hyundai Motor complex facilities and rising rental prices of commercial properties around Teheran-ro." However, this was only about half of last year’s 18.74% increase. Next, Seongdong-gu’s increase rate was 9.81%, influenced by the rise in apartment land prices in Eungbong-dong and Geumho-dong 1-ga. Seodaemun-gu also recorded a 9.09% increase in land prices due to the rise in apartment complexes in Bukahyeon-dong and Bukgajwa-dong, as well as commercial land in Changcheon-dong and Yeonhui-dong. Dongjak-gu’s increase rate was 8.84%, with land prices rising following the completion of development projects in Dongjak-dong, Sadang-dong, and Heukseok-dong.

By land use zone, residential areas rose by 8.92%, commercial areas by 6.21%, industrial areas by 8.24%, and green areas by 4.28%.

The most expensive land was the Nature Republic store site in Chungmuro 1-ga (Myeongdong 8-gil), Jung-gu, which has held the top spot since 2004. The publicly announced land price here was 199 million KRW per square meter, up 8.74% from 183 million KRW last year. Considering the steady upward trend in Seoul land prices, it is expected to surpass 200 million KRW next year without difficulty.

For residential areas, the most expensive land was the site of Acro River Park located in Banpo-dong 2-12, Seocho-gu. The price here reached 25 million KRW per square meter. Acro River Park marked the beginning of the era of 100 million KRW per pyeong (3.3㎡) last August when a 59㎡ (exclusive area) unit was traded for 2.39 billion KRW, and in October of the same year, an 84㎡ unit was traded for 3.4 billion KRW, setting a new record for the highest-priced apartment in Korea. Among industrial areas, the most expensive land was the site at 658-1, Seongsu-dong 1-ga, Seongdong-gu, where the Peugeot AS French Motors auto repair shop is located. The land price was 13.21 million KRW per square meter. Among green areas, the most expensive land was near Gaepo Jugong 1-danji in Gaepo-dong 591-1, Gangnam-gu, considered the leading site for reconstruction in the area, with a price of 27.56 million KRW per square meter.