Apartment Prices Fall, Officetels Rise Amid Strengthened Real Estate Tax Policies.

The strengthened real estate tax system has been fully implemented since the 1st, complicating the calculations for real estate investors. This is because the comprehensive real estate tax has increased across the board, and the burden has significantly risen for those with short holding periods or multiple homeowners in capital gains tax.

For two-homeowners in regulated areas, the capital gains tax surcharge rate added to the basic tax rate (6-42%) has been raised from the current 10 percentage points to 20 percentage points. For those owning three or more homes, it increases from 20 percentage points to 30 percentage points.

Accordingly, the highest capital gains tax rate for multiple homeowners has soared from the previous 65% to 75%. Up to a gain of 12 million won, a general tax rate of 6% applies, but adding the 30 percentage point surcharge raises the rate to 36%. For example, if a house is sold within one year of purchase, a 70% capital gains tax applies, and if someone owns three or more homes and gains over 1 billion won, they will pay up to 75% tax.

Simply put, for multiple homeowners, no matter how much the house price rises by tens of billions of won, the profit they take home after selling the house is likely to be almost nothing or even negative.

On the other hand, officetels have relatively lower tax burdens. Officetels can still be registered as rental businesses and receive various tax benefits such as exemption from comprehensive real estate tax.

Looking closely at the actual tax conditions imposed, acquisition tax for houses with exclusive area under 85㎡ only includes local education tax, while houses over 85㎡ are also subject to the special rural tax. Two-homeowners in adjustment target areas such as Seoul face an acquisition tax surcharge of 8%, but considering the additional special rural tax (0.6%) and local education tax (0.4%), they effectively pay 9% acquisition tax.

Holding taxes (property tax and comprehensive real estate tax) also include local education tax, urban planning tax, and special rural tax. Local education tax is 20% of the property tax amount, urban planning tax is 0.14% of the property tax base, and the special rural tax, an additional tax on comprehensive real estate tax, is about 20% of the comprehensive real estate tax amount. The effective tax rate for those owning two or more homes in adjustment target areas rises to 1.44-7.2%.

The capital gains tax rate for multiple homeowners has increased by 10 percentage points from before, rising from a maximum of 65% to 75%. Adding a local income tax of 10% means the actual capital gains tax rate borne by those owning two or more homes reaches a staggering 68.2%.

For multiple homeowners, officetels are more advantageous to acquire than houses in many respects. Even if multiple homeowners acquire officetels, they only pay a registration tax of 4.6% regardless of the number of houses owned. Capital gains tax is also only the basic rate of 40% without any surcharge.

As regulations poured down on the housing market, demand for officetel sales also surged significantly. Especially, investment enthusiasm is hot for high-end officetels in the Gangnam area, where price appreciation potential is high. While officetels have traditionally been known as rental income products, their status has recently risen as residential products.

The ‘Le Pied in Gangnam’ officetel near Gangnam Station, with penthouses priced over 5 billion won, completed contracts for all units within six months. Nearby ‘Luca831’ also recorded a highest subscription competition rate of 47.5 to 1 with 4,092 applicants for 337 units.

A real estate expert said, “The higher the price of high-end officetels, the greater the difference in these tax benefits, leading to an increase in customers inquiring about high-end officetels for investment purposes,” adding, “Even if the price is high, demand is strong if the location and community facilities are excellent.”