Jo Eun-hee, Seocho District Mayor, "Official Land Price is a 'Penalty, Not a Tax'... Residents' Sentiments Boil"

Total of 208 Households with Official Price Realization Rate Over 90% Compared to Actual Transaction Price · Public Housing Official Price Doubled · Rental and Sale Apartment Official Prices Reversed · Discrepancies in Comprehensive Real Estate Tax Eligibility for Same Apartment... Six-Point Petition for Real Estate Official Price System Improvement Demands Transparent Disclosure of Government's Unreliable Price Calculation Basis

[Asia Economy Reporter Jong-il Park] Jo Eun-hee, Mayor of Seocho District, on the 5th conveyed the boiling public sentiment of frontline residents, calling the government's unfair and unclear "blind" official land prices "fines, not taxes."

Mayor Jo launched the "Real Estate Official Price Verification Team," composed of appraisers and real estate experts, on March 19 and conducted a full survey of 125,294 apartment households in the area. Based on the results, she presented cases such as ▲208 households with an official price realization rate of 90% or higher compared to actual transaction prices ▲100% increase in official prices of low-income housing ▲reversal of official prices between rental and sale apartments and conflicting comprehensive real estate tax (종부세) applicability for the same apartment. She announced a six-point proposal for improving the real estate official price system, requesting the government to transparently disclose the basis for official price calculations, which currently lack principles and are based on poor grounds.

#Seocho District Official Price Verification Error Cases

★ (Resident A from Bangbae-dong) The single house I purchased for living has become a burden creating expensive taxes. I raised my children in this one house all my life, but now, at retirement age, I am being driven out of my home. I live alone now, but how can I possibly afford the taxes with the sharply increased official price?

★ (Resident B from Seocho-dong) People say it’s good if house prices go up, but that’s not true. As a newlywed couple, we struggled to get a loan five years ago to buy a house. Prices elsewhere have risen so much that we can’t move, and I have to pay my entire monthly salary in taxes. How can such excessive taxes be imposed on unrealized gains?

★ (Merchant C from Yangjae-dong) Due to COVID-19, running my restaurant is difficult, and even paying rent is tight. House prices and official prices keep rising, and I don’t know how to pay over 2 million won in taxes while raising two children.

Currently, over 105 elderly residents in Seocho District with no income have been excluded from basic pension eligibility, severely impacting their livelihoods.

On March 19, Jo Eun-hee, Mayor of Seocho District, launched the "Real Estate Official Price Verification Team," composed of appraisers and real estate experts, and conducted a full survey of 125,294 apartment households in the area.

In particular, after meticulously cross-checking 4,000 households that had transactions last year, the team proposed five improvement directions for the current government's unreasonable official price system.

? Clear basis for official price calculation ? Transparent disclosure of realization rates by housing owners ? Full re-investigation of incorrectly calculated official prices this year ? Transfer of authority over real estate official price decisions to local governments (requesting Seocho District to be designated as a pilot project area) ? Need for alternative methods to apply official prices in case of future real estate price declines

The "Real Estate Official Price Verification Team," composed of appraisers and real estate experts, conducted on-site surveys and comprehensive analyses of transaction prices and official price reflection rates for apartments in the area, discovering four types of official price errors.

▲ Cases with realization rates of 90% or higher

▲ Cases where official prices of low-income housing rose by 100% or more due to transactions in the previous year

▲ Cases where official prices of rental and sale apartments were reversed

▲ Cases where comprehensive real estate tax applicability differed for the same apartment

◇ Cases with realization rates of 90% or higher

Among about 400 households with transactions last year, 208 households (about 5%) had official price realization rates of 90% or higher compared to actual transaction prices.

The investigation confirmed cases in several apartment complexes in Seocho District where official prices were set higher than transaction prices.

Out of 125,294 apartment households in the area, 7,016 transactions occurred last year. Excluding special transactions such as shares and pre-sale rights, 4,284 actual transactions were carefully verified, revealing official price realization rates compared to actual transaction prices as follows: ▲851 households (about 19.8%) at 80% or higher ▲410 households (about 9.6%) at 85% or higher ▲208 households (about 4.8%) at 90% or higher ▲136 households (about 3%) at 100% or higher.

◇ 100% increase in official prices of low-income housing due to previous year transactions

Villas and other low-income housing, which had no prior transaction cases and maintained low prices, saw official prices suddenly rise by 100% or more when actual transactions occurred to reflect realization rates.

Low-income housing such as row houses and multi-family houses, which had few or no transactions, experienced sudden official price surges of over 100% due to temporary transaction occurrences being reflected in official prices.

In Seocho District, 3,101 households had official price increases exceeding three times the average apartment price increase rate of 13.53%, most of which were low-income housing like multi-family and row houses.

Since this significantly affects low-income households through increased property taxes and loss of welfare benefits, the rapid rise in official prices of low-cost low-income housing should be based on the average realization rate over the past three years’ transaction cases, and a cap should be considered. (Among 1,426 basic pension recipients in Seocho District in 2021, 105 (7.3%) are expected to lose eligibility.)

◇ Reversal of official prices between rental and sale apartments

The official prices of rental apartments, which support socially marginalized groups, and sale apartments were reversed, with rental apartments having higher official prices than sale apartments.

For example, LH 5 Complex apartments (rental) in Umyeon-dong and nearby Seocho Hills apartments (sale) showed a 53.9% increase in official prices for rental apartments this year, causing a price reversal.

This appears to be because rental apartment owners, being LH Corporation, are unlikely to object to price increases, and possibly to set higher sale prices upon future conversion to sale. Therefore, a review is needed to balance official prices between rental and sale apartments in the same area with similar construction years and sizes.

◇ Conflicting comprehensive real estate tax applicability for the same apartment

Despite being on the same floor and having the same area, comprehensive real estate tax applicability differed due to the presence or absence of transaction records.

In Banpo Family Apartments, the official price increase rates differed between Building 101 and 102 depending on transaction cases, resulting in conflicting comprehensive real estate tax applicability.

Even within the same apartment, same floor, and same area, a 20% difference in official price estimates occurred, raising many questions about fairness and reliability. The team emphasized the need for re-investigation of such apartment types.

The current government official price calculation relies on a few Korea Real Estate Board officials using statistical mass appraisal, causing many errors. Distrust in official prices, spreading nationwide including Seoul and Jeju Island, is seen as "tax extortion on low-income citizens, not speculative forces," leading to a flood of objections from the public.

According to media reports, complaints filed with the Ministry of Land, Infrastructure and Transport last year reached 37,410, a 190-fold increase from 191 cases in 2016 over four years.

In Seocho District alone, about 7,000 complaints were submitted in 2020, but only about 1% were accepted. However, the exact number and reasons for acceptance remain undisclosed due to the "blind" system. Urgent improvement measures are needed for the government official price system as a fair tax policy trusted by the public.

Jeon Hee-ryong, Governor of Jeju Special Self-Governing Province, and Jo Eun-hee, Mayor of Seoul Seocho District, strongly proposed the following to the government for "Real Estate Official Price System Improvement" based on the analysis results of Jeju and Seocho official prices.

◇ Proposal for Real Estate Official Price System Improvement

Jeju Special Self-Governing Province and Seocho District propose the following based on the analysis results from official price verification.

First, since official prices are calculated based on poor grounds without principles, the government should transparently disclose the calculation basis.

Second, immediately stop poor official price calculations without on-site investigations and conduct a full re-investigation.

Third, stop unfair official price increases that cause welfare benefit losses and create welfare blind spots.

Fourth, strongly request freezing and full re-investigation of official prices that have sharply risen compared to the previous year.

Fifth, propose that not only the elected mayors of Seoul and Busan but all local government heads nationwide establish official price verification centers and joint investigation bodies to participate in verification and re-investigation.

Sixth, propose transferring the government’s authority over real estate price disclosure to local governments.