Despite Freeze on Official Price Realization Rate, Jamsil Jugong Property Tax Jumps from 4.39 Million to 6.32 Million Won

Next Year's Apartment Official Price Maintains 69% of Market Value
Fair Market Value Ratio Adjusted Upward, Complexes with Smaller Market Price Declines
Increased Property Tax Burden

As the government has decided to freeze the ratio of publicly announced prices to real estate market prices (public price realization rate) at this year's level for next year, the holding tax (property tax + comprehensive real estate tax) burden on some high-priced single homeowners and multiple homeowners is expected to increase. This is because the price decline in major complexes in Seoul has not been significant or has even risen. Additionally, the fair market value ratio, which was temporarily reduced to 43-45% this year, is likely to be adjusted upward next year, increasing the tax burden. However, the actual holding tax amount to be paid is expected to vary depending on the fluctuation of the publicly announced prices in March next year.

According to a holding tax simulation analyzed by Woo Byung-tak, head of Shinhan Bank WM Consulting's real estate team, based on the publicly announced prices of apartment complexes on the 21st, a single homeowner owning an 84㎡ unit in Mapo Raemian Prugio (a complex with a November market price of 1.9 billion KRW) paid 5.72 million KRW in holding tax in 2022, but this year it is estimated to decrease by 44% to about 3.51 million KRW. However, next year, the holding tax is estimated to increase by nearly 12% from this year to 3.89 million KRW. The publicly announced price of this apartment dropped from 1.655 billion KRW in 2022 to 1.339 billion KRW this year, but is expected to rise to 1.43 billion KRW next year.

This estimate applies the 3% property tax assessment cap, which is scheduled to be implemented from next year, and assumes a 60% fair market value ratio for both the comprehensive real estate tax and property tax. Under current law, the fair market value ratio for property tax is only applied at 43-45% until 2023, so unless the law is amended, 60% will be applied next year. Also, the estimate may vary depending on the market price as of January 1 next year and the government's application level of the fair market value ratio.

A single homeowner owning an 84㎡ unit in Wangsimni Tens Hill (a complex with a market price of 1.4 billion KRW) paid 3.5 million KRW in holding tax in 2022, but this year's holding tax burden is expected to decrease by about 47% to 2.08 million KRW. Next year, it is expected to increase by about 7% to approximately 2.26 million KRW.

The reason why the holding tax decreased more than the drop in publicly announced prices this year is due to last year's comprehensive real estate tax reform, which lowered tax rates, and the increase in the basic deduction amount for single homeowners from 1.1 billion KRW to 1.2 billion KRW. However, next year, the fair market value ratio, which was temporarily applied this year, will be adjusted upward, and there are some complexes where market prices have risen or the decline has lessened compared to last year, so the number of complexes with increased holding tax burdens is expected to rise significantly.

In fact, the holding tax for a single homeowner living in Jamsil Jugong Complex 5 in Songpa-gu, Seoul (82.61㎡ unit, market price of 2.7 billion KRW) will be reduced by more than half. Last year, the holding tax alone was 10.5 million KRW, but this year it is expected to be only 4.39 million KRW. The publicly announced price this year is 1.517 billion KRW, down 33.0% from the previous year. Next year, the publicly announced price is estimated to rise by 34.2%, requiring a holding tax payment of 6.32 million KRW. This means the holding tax burden will increase by 50% compared to this year.

The property tax and comprehensive real estate tax for an 84㎡ unit in Eunma Apartment, Daechi-dong, Gangnam-gu, Seoul, is estimated to increase by about 32% next year to 5.83 million KRW from 4.51 million KRW this year.