Jamsil Jugong 5 Complex Property Tax 5.81 Million Won... 1.42 Million Won Increase from Last Year

Officially Announced Property Prices Rise Again, Increasing Tax Burden

This year, the publicly announced price of apartment complexes in Songpa-gu, Seoul, rose by 10%. A single homeowner of the flagship apartment complex, Jamsil Jugong 5-danji, will pay 5.81 million KRW in holding tax (property tax + comprehensive real estate tax). This amount is 1.42 million KRW higher than last year. Although the same realization rate (69%) was applied for two consecutive years, the tax burden increased as the actual transaction prices themselves rose.

View of Jamsil Jugong Complex 5, Songpa-gu, Seoul / Photo by Heo Younghan

Additionally, the upper limit on the property tax base, which will be set within 5% annually, and whether the temporarily lowered (from 60% to 45% or less) property tax fair market value ratio from last year is maintained, are expected to affect the increase or decrease in holding tax.

According to a simulation calculation by the Ministry of Land, Infrastructure and Transport and Woo Byung-tak, head of the real estate team at Shinhan Bank WM Division, a single homeowner (aged 59, owning for less than 5 years) of an 82㎡ unit (exclusive area) in Jamsil Jugong 5-danji with a publicly announced price of 1.972 billion KRW this year is estimated to pay 5.81 million KRW in holding tax, a 32.38% increase compared to the previous year. The significant factor was the approximately 30% rise in the publicly announced price from 1.517 billion KRW last year. This estimate assumes a 3% annual cap on the property tax base, the same fair market value ratio as last year, and no tax credits.

Under the same conditions, the holding tax increase rate was also high for Eunma Apartment in Daechi-dong, Gangnam-gu. The publicly announced price rose by more than 17% to 1.812 billion KRW, and the holding tax for an 84㎡ unit is about 5.23 million KRW. The tax burden increased by 18.74% compared to the previous year. Additionally, the homeowner of an 84㎡ unit in Raemian Prestige, Banpo-dong, Seocho-gu, whose publicly announced price rose 9% from 2.108 billion KRW to 2.376 billion KRW within a year, will see a 15.40% increase in tax burden. The estimated holding tax is 9.32 million KRW.

Apartments outside Gangnam were found to be partially excluded from the comprehensive real estate tax. For example, Mapo Raemian Prugio 84㎡ in Mapo-gu saw its publicly announced price rise by more than 6%, from 1.094 billion KRW to 1.164 billion KRW, but did not pay comprehensive real estate tax for two consecutive years. This is because the government raised the basic deduction for comprehensive real estate tax from 600 million KRW to 900 million KRW through tax law amendments, and single homeowners can receive deductions up to 1.2 billion KRW. Therefore, even within the same complex, owners of 114㎡ units with a publicly announced price of 1.418 billion KRW must pay holding tax totaling 3.64 million KRW, including 410,000 KRW in comprehensive real estate tax. Wangsimni Tenshill 84㎡ in Seongdong-gu, with a publicly announced price of 1.023 billion KRW, is also excluded from the comprehensive real estate tax as it is below 1.2 billion KRW. Accordingly, although the publicly announced price rose 8% compared to the previous year, the holding tax to be paid increased by only about 4% to 2.18 million KRW.

Real estate experts expect the impact of this year's apartment complex publicly announced prices on the sales market to be minimal. The change rate compared to the previous year was only 1.52%, which aligns with the policy goal of reducing the tax burden.

However, they believe it is appropriate to adjust the 'Publicly Announced Price Realization Roadmap,' which was promoted during the previous Moon Jae-in administration amid rising real estate prices, to fit the current situation and set future directions accordingly. Lee Eun-hyung, a research fellow at the Korea Institute of Construction Policy, said, "It is not possible to apply the 2020 level realization rate every year going forward. Since this is a temporary measure, the government needs to consider actions such as abolishing the roadmap."

The fair market value ratio, which serves as the tax base, was also lowered by the government to 60% for comprehensive real estate tax and 45% or less for property tax, but adjustments can be made if concerns about revenue reduction arise. This ratio is a variable affecting the tax burden. It is determined by the Ministry of Economy and Finance and the Ministry of the Interior and Safety.