Public Hearing on Real Estate Official Price Realization Plan
All Real Estate Prices to Align at 90% Realization Rate
Speed Adjusted by Type and Price... Protecting Low-Income Groups
Mid-Low Prices Realized Slowly... High Prices Realized Faster
[Asia Economy Reporter Moon Jiwon] The government is expected to push forward a 'Realistic Public Price Plan' starting next year, aiming to raise the official real estate prices to 90% of market value.
For apartments and other multi-family housing, high-priced properties over 1.5 billion KRW will have their official prices increased by 3 percentage points annually to reach a 90% realization rate within 5 to 7 years, while mid- to low-priced properties under 900 million KRW will see increases of less than 1 percentage point annually over three years, giving taxpayers time to adjust to the increased tax burden.
The Ministry of Land, Infrastructure and Transport held a public hearing on the 'Realistic Public Price Plan' at 2 p.m. on the 27th at the Korea Appraisal Board's Seoul Yangjae-dong Metropolitan Headquarters, hosted by the Korea Research Institute for Human Settlements. The government plans to announce the final plan as early as this week after gathering sufficient opinions at the hearing.
According to sources inside and outside the government, the Ministry of Land is expected to propose a plan to achieve a 90% realization rate for all multi-family housing by 2030.
Earlier, Han Jeong-ae, the Democratic Party's Policy Committee Chair, said at the party's floor meeting that "the Korea Research Institute for Human Settlements will announce a roadmap for realistic land prices," adding, "It is a long roadmap aiming to match 90% of market value by 2030."
Currently, the realization rates of official real estate prices are 65.5% for land, 53.6% for detached houses, and 69.0% for apartments and other multi-family housing.
According to simulations released by the Ministry of Land, Infrastructure and Transport, it will take about 10 years for multi-family housing, 15 years for detached houses, and 8 years for land to reach a 90% realization rate.
Since the realization rates vary by real estate type and price range, the government is expected to set different speeds to reach the target realization rate.
First, multi-family housing will be divided into three categories: under 900 million KRW, 900 million to 1.5 billion KRW, and over 1.5 billion KRW, with adjusted speeds accordingly. As of this year, the realization rate for multi-family housing under 900 million KRW is 68.1%, 69.2% for 900 million to 1.5 billion KRW, and 75.3% for over 1.5 billion KRW.
The government has so far raised the realization rates sharply for high-priced properties over 900 million KRW, judging that the lower rates for high-priced real estate compared to low-priced ones were unfair. As a result, the realization rates for low-priced properties are now relatively low and urgently need to be increased.
However, since sharply raising official prices for mid- to low-priced housing would increase the tax burden on ordinary citizens, it is likely that the government will raise prices gradually over a longer period compared to high-priced housing.
Accordingly, for multi-family housing under 900 million KRW, the government plans to raise the official prices slightly by less than 1 percentage point annually until 2023, then increase by 3 percentage points annually from then until 2030 to reach the final 90% realization rate.
For multi-family housing over 900 million KRW, the government will start raising prices by 3 percentage points annually from next year. Thus, multi-family housing priced between 900 million and 1.5 billion KRW will reach a 90% realization rate by 2027, and housing over 1.5 billion KRW will achieve it by 2025.
Minister of Land, Infrastructure and Transport Kim Hyun-mi is responding to a lawmaker's question at the full meeting of the Land, Infrastructure and Transport Committee held at the National Assembly on the 11th. (Photo by Yonhap News)
For detached houses, it is expected to take about 15 years to reach a 90% realization rate across all price ranges. Currently, the realization rates for detached houses are 52.4% for under 900 million KRW, 53.5% for 900 million to 1.5 billion KRW, and 58.4% for over 1.5 billion KRW, all lower than those for multi-family housing.
The government plans to raise official prices for detached houses under 900 million KRW slightly by less than 1 percentage point annually until 2023, then increase by 3 percentage points annually until 2030, reaching 90% by 2035.
For the 900 million to 1.5 billion KRW range, prices will be raised by 3.6 percentage points annually, and for over 1.5 billion KRW, by 4.5 percentage points annually, reaching 90% realization rates by 2030 and 2027, respectively.
Land currently has an average realization rate of 65.5%. If the target is set to 90%, it can be achieved within 8 years by raising prices by 3 percentage points annually.
If the government raises the realization rates of official prices, the tax burden on homeowners, including comprehensive real estate tax and property tax, will inevitably increase. Tax hikes are unavoidable not only for multi-homeowners but also for ordinary citizens owning mid- to low-priced homes.
Therefore, the government plans to prepare measures to reduce the tax burden on ordinary citizens separately from the increase in realization rates. It is expected to lower tax rates on mid- to low-priced real estate to reduce the actual burden.
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