"Not All True"... Ministry of Land, Infrastructure and Transport's 'Official Price Error' Claims Refuted Point by Point

Different Official Price Change Rates by Line... "Because of Different Areas"
Official Prices for Accommodation Facilities... "Jeju-do Registry Cannot Be Changed"
Increased Burden on Ordinary People?... "99% Property Tax Reduction in Jeju-do"

Kim Soo-sang, Director of the Housing and Land Office at the Ministry of Land, Infrastructure and Transport (left), and Son Tae-rak, President of the Korea Real Estate Board, are seated on the afternoon of the 6th at the Government Sejong Complex in Sejong City for a back briefing regarding the appraisal price calculation standards for Seocho-gu and Jeju-do. (Photo by Yonhap News)

[Asia Economy Reporter Moon Jiwon] The Ministry of Land, Infrastructure and Transport strongly refuted the claims made by Jeju Province Governor Won Hee-ryong and Seocho District Mayor Cho Eun-hee that numerous errors were found in the process of calculating this year's official prices of apartment complexes. The Ministry's position is that all claims such as "official prices being set higher than market prices" or "official prices rising significantly mainly for low-income housing" are incorrect.

On the 6th, the Ministry held a briefing regarding this year's official prices of apartment complexes and rebutted point by point the errors announced the previous day by Jeju Province and Seocho District at their press conferences.

Actual transaction price around 1.2 billion KRW but official price over 1.5 billion KRW?

First, regarding the claim that official prices and market prices were reversed, the Ministry explained that this is not true. Seocho District previously cited the case of Apartment A in Seocho-dong (exclusive area 80m²), claiming that this apartment was sold for 1.26 billion KRW in October last year, but the official price was set at 1.538 billion KRW, which is 1.2 times the transaction price.

In response, the Ministry stated, "Apartment A is a 31-pyeong unit built in 2020, with similar nearby transaction prices ranging from 1.8 billion to 2.2 billion KRW, and the jeonse (long-term deposit lease) price in the complex is about 1.1 billion KRW," adding, "the actual transaction price of 1.26 billion KRW cannot be considered an appropriate market price."

Since 1.26 billion KRW is lower than the market price, it cannot be used as a basis for calculating the official price. The Ministry added, "The structure is not such that one or two specific transactions in the complex directly determine the market price, as claimed by local governments," and "when there are insufficient transaction cases, we refer to transaction cases of similar-sized units in nearby complexes to prevent market price distortion and calculate an appropriate market price."

Different official price change rates by line... Ministry: "Because of different sizes"

Regarding the claim that official price change rates differed by line even within the same building complex and same block in Jeju Province, the Ministry explained that this reflects market prices. Jeju Province cited an example of a 13-story apartment, stating that the official prices for lines 1 and 4 rose by 6.8 to 7.4% compared to last year, while those for lines 2 and 3 fell by 11 to 11.5%, claiming that the official price calculations were inconsistent.

The Ministry explained, "The apartment cited by Jeju Province has different sizes for lines 1 and 4 (33 pyeong) and lines 2 and 3 (52 pyeong)," adding, "According to actual transaction cases and KB Real Estate price information, the 33-pyeong units increased in price, while the 52-pyeong units decreased."

It continued, "Even within the same complex, official price change rates can vary depending on preferences for unit sizes and individual characteristics of the area," emphasizing, "it is not reasonable to point out errors based solely on differences in change rates."

On the afternoon of the 5th, Won Hee-ryong, Governor of Jeju Special Self-Governing Province, and Cho Eun-hee, Mayor of Seocho District, Seoul, read a proposal regarding the verification of publicly announced prices at a joint press conference held at the People Power Party Central Party Office in Yeouido, Seoul, titled "Normalization of the Government's Unfair Publicly Announced Prices." (Photo by Yonhap News)

Official price for lodging facilities? Ministry: "Registered as multi-family housing in Jeju's property records"

Regarding Jeju Province's claim that lodging facilities were classified as apartment complexes and thus official prices were set, the Ministry pointed out, "The buildings in question are registered as row houses or multi-family housing in the property records of Jeju City and Seogwipo City," adding, "local governments are responsible for managing and supervising whether housing is illegally used as lodging facilities and for taking active measures such as correction orders to ensure use according to permitted purposes."

In other words, the official prices were set because Jeju Province failed to properly manage the property records.

The Ministry further explained, "The Korea Real Estate Board shares the list of 'officially priced housing' with each local government every year during the official price survey process and requests corrections if the property is not housing," adding, "the 10 buildings Jeju Province presented as lodging facilities are included in the list of apartment complexes, and the local government did not provide any correction opinions."

99% of Jeju Province residents with one house see reduced property tax burden

The Ministry also refuted the claim by Jeju Province and Seocho District that "most of the houses with sharply rising official prices are low-income housing." The Ministry pointed out, "71% of apartment complexes in Seocho District with official prices below 300 million KRW had official price change rates of 10% or less," and "in Jeju Province, 51.2% saw a decrease in official prices, and among those with official prices below 300 million KRW, 52.8% experienced a decrease."

It added, "Based on this year's official price proposals for apartment complexes, property owners with one house and an official price of 600 million KRW or less will see a practical reduction in property tax burden according to the revised Local Tax Act," explaining, "in Jeju Province, 99% fall under the category of one house with an official price of 600 million KRW or less, so their property tax burden will decrease compared to last year."

When asked whether the Ministry thinks Jeju Province or Seocho District made announcements implying problems with official price calculations despite knowing these facts, a Ministry official said, "Because official prices fluctuated significantly this year, there are parts that many local governments and citizens misunderstand," adding, "the government made explanations to help the public understand, and it is difficult to interpret the political intentions of Seocho District and Jeju Province."