2023 Apartment Official Price Assessment Results and Impact Announcement
Largest Decline Since Related System Introduction
Deputy Prime Minister for Economy Choo Kyung-ho is delivering opening remarks at the Real Estate Ministers' Meeting held at the Government Seoul Office in Jongno-gu, Seoul, on the 22nd. Photo by Yoon Dong-joo doso7@
This year, the publicly announced prices of apartment complexes nationwide fell by 18.6% compared to last year, returning to 2021 levels. As a result, the tax burden on single-home households will decrease by more than 20% compared to 2020.
On the afternoon of the 22nd, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho chaired the '5th Real Estate Related Ministers' Meeting' at the Government Seoul Office and announced the '2023 Apartment Complex Publicly Announced Price Calculation Results and Impact.'
This year, the publicly announced prices of apartment complexes fell by an average of 18.61% nationwide. Considering that prices rose by 17.2% last year, the government evaluated that this year's prices have effectively returned to 2021 levels.
A government official explained, "The previously overheated market saw an overall decline in real estate prices last year due to interest rate hikes and government efforts to stabilize the market. Additionally, the 2023 realization rate was lowered to the 2020 level (apartment complexes from 71.5% to 69.0%) according to the revised plan for price realism announced in November last year, which also contributed to the further decline."
Publicly Announced Prices Turn Downward for the First Time in 10 Years
This year's publicly announced prices recorded the largest decline since the apartment complex price survey and calculation system was introduced in 2005. The upward trend in prices that had continued since 2014 shifted to a downward trend for the first time in 10 years. Moreover, the decline is about 14 percentage points larger than the two previous periods of price decreases (2009: -4.6%, 2013: -4.1%).
By region, all cities and provinces saw declines in publicly announced prices this year. The largest decreases were in Sejong (-30.68%), Incheon (-24.04%), Gyeonggi (-22.25%), and Daegu (-22.06%).
The median value of this year's publicly announced prices (the middle value when multiple data points are arranged in order) was 169 million KRW, down 23 million KRW from last year's 192 million KRW. By region, Seoul was 364 million KRW, Sejong 271 million KRW, and Gyeonggi 221 million KRW.
Single-Home Households with 1.12 Billion KRW Apartment See Property Tax Reduced by 248,000 KRW
With the decline in publicly announced prices, burdens such as health insurance premiums (for regional subscribers) and national housing bond purchases will also decrease. Publicly announced prices serve as basic data for assessing property levels in various welfare programs such as the Basic Livelihood Security System, national scholarships, and earned income and child incentives. Therefore, when the publicly announced prices of owned real estate fall and property values decrease, it becomes easier to meet eligibility criteria for these welfare programs. Citizens who lost eligibility due to price increases over the past two years may be included again, and existing beneficiaries may receive greater benefits.
The Ministry of Economy and Finance expects that this year's property tax burden (property tax + comprehensive real estate tax) will significantly decrease due to the decline in apartment complex prices, the 2022 comprehensive real estate tax reform, and the 2023 reduction in the property tax fair market value ratio, reflecting the normalization of real estate taxation.
Assuming the fair market value ratios for property tax and comprehensive real estate tax remain the same as in 2022, simulations by the Ministry indicate that this year's property tax burden will be lower than in 2020. For example, a single-home household owning an apartment with a publicly announced price of 320 million KRW paid 634,000 KRW in property tax in 2020, but if the price is 390 million KRW this year, the tax will be 454,000 KRW, a reduction of 284,000 KRW. For an owner of an apartment priced at 1.12 billion KRW, the total property tax was 3,724,000 KRW in 2020 (3,414,000 KRW property tax + 310,000 KRW comprehensive real estate tax), but this year (with a price of 1.25 billion KRW), the total tax will be 2,802,000 KRW (2,741,000 KRW property tax + 61,000 KRW comprehensive real estate tax), a decrease of 248,000 KRW.
However, individual tax burdens depend on factors such as the fair market value ratio, deduction amounts, and tax rates. The fair market value ratios for property tax and comprehensive real estate tax, based on the newly announced prices, will be announced in April and the first half of the year, respectively.
Due to the decline in publicly announced prices, the number of apartment complexes eligible for special tax rates (those priced at 900 million KRW or less) increased by 650,000 units compared to last year, reaching 14.43 million units (97.1% of apartment complexes). This means many households will newly qualify for the special tax rate. Households owning only one home priced at 900 million KRW or less receive a 0.05 percentage point reduction in property tax rates.
Regional Subscribers' Health Insurance Premiums Decrease by 3,800 KRW per Month
Health insurance premiums for regional subscribers are calculated by multiplying the score by income and property (combined by household) by the amount per point (208.4 KRW/point in 2023). The decline in publicly announced prices is expected to reduce property values and thus ease the health insurance premium burden.
Based on an analysis of regional subscribers' income and property as of December last year, the government estimates that the decline in publicly announced prices will reduce health insurance premiums by an average of 3,839 KRW per household per month compared to the same month last year (a 3.9% decrease in average payments by regional subscribers).
Additionally, the burden of purchasing national housing bonds, which occurs when registering real estate transactions such as sales, inheritance, and mortgage loans, will decrease by about 100 billion KRW over the year due to the price decline. For example, if an apartment in Seoul with a 2022 publicly announced price of 700 million KRW (3.1% rate applied) drops to 507.9 million KRW (2.6% rate applied) in 2023, the bond purchase amount decreases from 21.7 million KRW to 15.05 million KRW, a reduction of 6.65 million KRW. When discounted (12.7% applied) and sold, the actual national burden decreases by 850,000 KRW.
Decrease in Income Conversion Amounts Leads to Increased Welfare Benefits
The decline in publicly announced prices reduces income conversion amounts used in national scholarships, the Basic Livelihood Security System, and earned income and child incentives, which is expected to increase welfare benefits.
Under the Basic Livelihood Security System, households are selected as beneficiaries if their recognized income (income evaluation amount + income conversion amount of property) is below a certain percentage of the median income. For a four-person household in 2023, the median income is 5.4 million KRW per month, and beneficiaries are selected if they fall below 30% for livelihood benefits, 40% for medical benefits, 47% for housing benefits, and 50% for education benefits.
Therefore, if the publicly announced price of a home owned by an applicant household (or existing beneficiary household) decreases, the recognized income decreases, potentially allowing households that previously lost eligibility to be selected as beneficiaries or increasing benefits for existing beneficiaries depending on their income and property status.
The eligibility for national scholarships, which provide differential support for university tuition based on students' and parents' income and property, will also expand. The 'National Scholarship Type I' supports households with monthly income conversion amounts (from earned income and general and financial property) below 200% of the median income. Thus, some households that owned apartment complexes and had monthly income conversion amounts above 200% of the median income, making them ineligible for the 2023 national scholarship, are expected to qualify for benefits in 2024 due to the price decline, according to the Ministry of Economy and Finance.
The 2023 publicly announced apartment complex prices will be open for owners' opinions until the 11th of next month, after which the government will review whether to reflect them. Following deliberation by the Central Real Estate Price Public Announcement Committee under the Real Estate Public Announcement Act, the prices will be finalized and announced on April 28. When announcing the prices, the government will also disclose the calculation basis data, including housing characteristics, transaction cases, and comprehensive calculation opinions. After the announcement, objections can be filed for one month until May 29, and after re-investigation and review of the submitted cases, adjustments and re-announcements are planned by the end of June.
Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho stated, "The government will closely monitor changes in the real estate market conditions and the impact of publicly announced prices on citizens' lives. Relevant ministries will make every effort to ensure a smooth landing of the real estate market and stabilize housing for ordinary citizens, minimizing their housing burdens."
Deputy Prime Minister for Economy Choo Kyung-ho is attending the Real Estate Ministers' Meeting held at the Government Seoul Office in Jongno-gu, Seoul on the 22nd, delivering opening remarks. Photo by Yoon Dong-joo doso7@
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
