Expected Reduction in Comprehensive Real Estate Tax Burden Due to Official Price Decline
Holding Tax Burden Falls to 2020 Levels
Property Tax Fair Market Value Ratio Adjustment Level
Greater Reduction in Holding Tax Anticipated
This year, the official prices of apartment complexes have dropped by the largest margin ever, significantly reducing the burden of property taxes. In particular, owners of a single home in the Gangbuk area will not have to pay comprehensive real estate tax due to the decrease in official prices. Taxes for multi-homeowners, who previously faced a heavy tax burden, have also decreased to 2020 levels, leading to expectations that landlords will postpone selling their homes.
On the 27th, an analysis of property tax changes due to this year's official price adjustments was conducted by Woo Byung-tak, head of the real estate team at Shinhan Bank, revealing that the tax burden in major complexes within Seoul has decreased compared to 2020.
In Mapo-gu, a Gangbuk area, the official price of a Raemian Prugio apartment with an exclusive area of 84.59㎡ dropped by 20.84%, from 1.382 billion KRW last year to 1.094 billion KRW this year, excluding it from the comprehensive real estate tax.
As a result, while last year the total property tax including comprehensive real estate tax was 4.12 million KRW, this year only the property tax of 2.53 million KRW needs to be paid, reducing the burden by 38.7% compared to last year. This is also 26.4% lower than the 3.43 million KRW property tax in 2020.
Similarly, a Wangsimni Tenshill apartment in Seongdong-gu with an exclusive area of 84.9㎡ was subject to comprehensive real estate tax last year with an official price of 1.272 billion KRW, but this year it dropped to 947 million KRW, excluding it from the tax. Consequently, this year's property tax is expected to be 2.08 million KRW, a decrease of 40.5% from last year's 3.5 million KRW and 18.3% from 2020's 2.55 million KRW.
For official prices below 900 million KRW, a special property tax rate is applied until this year, and the tax burden is expected to decrease by more than 40% on average compared to 2020 when no special rate was applied.
In Gangdong-gu, Godeok-dong, the Raemian Godeok Hillstate apartment with an exclusive area of 84.74㎡ had an official price of 1.206 billion KRW last year, subject to comprehensive real estate tax, but this year it fell by 29% to 854 million KRW, making it eligible for the special property tax rate without comprehensive real estate tax. Last year, the property tax including comprehensive real estate tax was 3.14 million KRW, but this year it is expected to be halved to 1.57 million KRW (property tax only).
The special property tax rate reduces the property tax rate by 0.05 percentage points for single-homeowners with official prices below 900 million KRW and is applied temporarily for three years from 2021 through this year.
The tax burden for multi-homeowners decreases even more significantly than for single-homeowners. The comprehensive real estate tax surtax rate for owners of two or more homes, which ranged from a minimum of 1.2% to a maximum of 6%, has been eliminated and replaced with a single tax rate of 0.5% to 2.7%. For owners of three or more homes, a surtax rate of 2.0% to 5.0% applies only to the combined taxable value exceeding 1.2 billion KRW.
Two-homeowners holding an 84㎡ Eunma Apartment in Daechi-dong, Gangnam-gu, and an 84㎡ Raemian Prugio in Mapo will see their property tax decrease by 71.5% (38.32 million KRW), from 53.58 million KRW last year to 15.26 million KRW this year due to the drop in official prices.
If these two apartments are combined with an additional 84㎡ Raemian Hillstate in Godeok-dong, Gangdong-gu, a three-homeowner's property tax is expected to decrease by 68.9% (59.9 million KRW), from 86.91 million KRW last year to 27 million KRW this year. This is also 50-60% lower compared to the property tax in 2020.
However, given the significant drop in official prices this year, there is discussion of applying differentiated fair market value ratios depending on the price range, such as for low-priced and high-priced homes. The Ministry of the Interior and Safety announced last month during a briefing on official prices that the fair market value ratio for property tax would be applied at a level lower than last year's 45%. If lowered to 40%, the tax burden is expected to decrease even further.
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