Jamsil Jugong 5 Complex Single Homeowner's Property Tax Drops from 10.5 Million KRW to 4.38 Million KRW This Year

Significant Reduction in Property Tax Burden Due to Official Price Drop
Maraepu 84㎡ Comprehensive Real Estate Tax 0 Won... Property Tax Down 38%
"Increase in Wait-and-See Attitude Instead of Quick Sales"

Due to a significant drop in the publicly announced prices of multi-family housing (apartments) applied to this year's property tax and comprehensive real estate tax, the burden of holding taxes is expected to decrease substantially compared to last year. Experts predict that as the cost burden of holding real estate decreases, the pressure on existing homeowners to put their properties on the market will also lessen. However, the extent to which the final comprehensive real estate tax burden will decrease is likely to depend on the adjustment range of the fair market value ratio.

[Image source=Yonhap News]

Holding Tax Burden for Single-Homeowners in Maraepu and Banpo Xi Decreases by Over 30%

According to calculations based on the publicly announced prices released by the Ministry of Land, Infrastructure and Transport on the 22nd, commissioned by Woo Byung-tak, head of the real estate team at Shinhan Bank WM Division, a single homeowner owning a 84㎡ unit in Mapo Raemian Prugio in Mapo-gu, Seoul, paid 4.12 million KRW in holding taxes last year, but this year the tax burden decreases by about 38% to 2.52 million KRW. This is largely due to the recent drop in house prices, which reduced the publicly announced price from 1.382 billion KRW to 1.094 billion KRW. Furthermore, the basic deduction for the comprehensive real estate tax for single-homeowners increased from 1.1 billion KRW to 1.2 billion KRW, meaning homeowners in this complex who paid 730,000 KRW in comprehensive real estate tax last year are exempt from paying it this year. They only need to pay property tax.

The holding tax for someone owning an 84㎡ unit in Raemian Godeok Hillstate in Gangdong-gu is expected to decrease from 3.13 million KRW last year to 1.8 million KRW this year, nearly halving. Similarly, the publicly announced price of this complex dropped from 1.206 billion KRW last year to 854 million KRW this year, eliminating the comprehensive real estate tax burden and leaving only property tax to be paid.

The tax burden for single homeowners owning high-priced apartments is also expected to decrease significantly. The holding tax burden for a single homeowner owning an 84㎡ unit in Banpo Xi decreases by about 36%, from 13.86 million KRW last year to 8.82 million KRW this year. The publicly announced price of this complex dropped from 2.605 billion KRW last year to 2.246 billion KRW this year. As a result, a single homeowner who paid 6.8 million KRW in comprehensive real estate tax last year will pay 2.84 million KRW this year.

In the case of an 82㎡ unit in Jamsil Jugong Complex 5 in Songpa-gu, the publicly announced price this year is 1.517 billion KRW, down 49% from 2.266 billion KRW last year, resulting in a holding tax reduction from 10.5 million KRW to 4.38 million KRW, a 58% decrease. For someone owning an 84㎡ unit in Eunma Apartment in Gangnam-gu, the tax burden is estimated to decrease by about 45%, from 8.33 million KRW last year to 4.51 million KRW this year.

The reduction in holding tax burden is due to the significant drop in publicly announced prices caused by the downward trend in house prices, as well as the increase in the basic deduction for comprehensive real estate tax from 1.1 billion KRW to 1.2 billion KRW for single-homeowners. The per-person deduction also rose from 600 million KRW to 900 million KRW, and for jointly owned single-homeowner couples, it increased from 1.2 billion KRW to 1.8 billion KRW, greatly reducing the number of comprehensive real estate tax payers.

"Lower Tax Burden Will Reduce Urgent Sale Pressure on Homeowners"

Experts expect that as the tax burden decreases, more sellers will hold off on lowering asking prices and rushing to sell, instead choosing to wait and observe the market. Park Won-gap, senior real estate expert at KB Kookmin Bank, said, "With high interest rates and persistent expectations of price declines, the possibility of house price instability is low, and the reduced tax burden on existing homeowners will lessen the pressure to put properties on the market. In high-priced housing clusters like Gangnam, the trend of ‘smart single-homeownership’ through joint ownership by couples may continue, but for two-homeowners outside Gangnam, there will likely be few cases of reducing the number of homes due to comprehensive real estate tax burden."

Ham Young-jin, head of the Zigbang Big Data Lab, said, "The effect of recovering or improving housing transaction volumes due to reduced holding taxes from the drop in publicly announced prices is expected to be limited. Compared to the housing boom period, the purchasing environment for buying homes has worsened, and with lower tax burdens on homeownership, sellers are expected to hold off on urgent sales and observe the market."

However, the adjustment range of the fair market value ratio is expected to act as a variable affecting the level of tax burden relief. Ham said, "The government can adjust the fair market value ratio between 60% and 100% through enforcement ordinances, and to address the tax revenue decrease caused by this year's real estate price decline, the option of restoring the fair market value ratio from 60% back to 80% is also being considered."

Meanwhile, the Ministry of Land, Infrastructure and Transport announced that the adjustment plan for the comprehensive real estate tax fair market value ratio will be announced in the first half of this year, and the adjustment range for the property tax fair market value ratio will be announced next month.