"Tax Benefits on Property Holding for Building Tycoons"... Officially Announced Prices Diverge from Market Value

Analysis Results of Buildings Over 100 Billion KRW in Seoul by Gyeongsillyeon
Last Year's Market Price Reflection Rate 35%, 30%P Lower Than Government Announcement
Seongsu-dong 'Musinsa Campus E1' and 'CORNER50' Lowest
"Disclosure of Calculation Standards, Uniform Increase of Realization Rate to 80%"

An analysis revealed that the official price realization rate (market price reflection rate) of buildings with actual transaction prices exceeding 100 billion KRW in Seoul is 30 percentage points lower than the rate announced by the government. Accordingly, it is claimed that owners of high-priced buildings are receiving tax reduction benefits such as property tax cuts.

The Citizens' Coalition for Economic Justice (CCEJ) held a press conference on the 10th at the CCEJ auditorium in Hyehwa-dong, Jongno-gu, Seoul, to announce the results of the "Analysis of Official Land Prices for Buildings with Actual Transaction Prices Over 100 Billion KRW."

The Citizens' Coalition for Economic Justice (CCEJ) held a press conference on the 10th at the CCEJ auditorium in Hyehwa-dong, Jongno-gu, Seoul, to announce the analysis results of publicly announced land prices for buildings with actual transaction prices exceeding 100 billion won. Photo by Kwon Hyunji

"Realization Rate 30%P Lower Every Year"

According to CCEJ, the average realization rate of buildings with transaction prices over 100 billion KRW (13 cases) in Seoul last year was 35%. This value is obtained by dividing the total official land price of these buildings (966.7 billion KRW) by the land market price (2.7655 trillion KRW). This figure is 30.5 percentage points lower than the government's announced realization rate of 65.5% for last year. The realization rate is an indicator showing how much the official land price reflects the market price. A realization rate of 65% means that a building with a market price of 10 billion KRW has an official land price of 6.5 billion KRW.

In 2022 (36 cases), there was also a 33.6 percentage point gap between the realization rate (38%) and the government’s announced rate (71.6%), and similar phenomena were observed in 2021 (14 cases, 32.6 percentage points) and 2020 (34 cases, 29.5 percentage points). CCEJ stated, "Even considering regional differences between nationwide and Seoul, it is difficult to understand why the realization rate differs by about 30% every year."

The buildings with the lowest realization rates over the past four years were ‘Musinsa Campus E1’ in Seongsu-dong, Seongdong-gu, traded in 2023, and ‘CORNER50’ in Seongsu-dong 2-ga, traded in 2022, both with realization rates around 11%. In the case of Musinsa Campus E1, the land market price was 98.4 billion KRW, but the official land price was 10.9 billion KRW, and for CORNER50, the land market price was 109.4 billion KRW, with an official land price of 12.5 billion KRW. Following these were ‘Samil Building’ in Gwancheol-dong, Jongno-gu (2021, 16%), ‘Young City’ in Mullae-dong, Yeongdeungpo-gu (2020, 17%), and ‘LG Electronics Gasan B Research Center’ in Gasan-dong, Geumcheon-gu (2022, 19%).

"Current Official Prices Effectively Reduce Property Taxes"

CCEJ argued that applying the current official land prices as they are results in tax reduction benefits for owners of high-priced buildings. Since official land prices are used as the basis for various tax assessments such as property tax, a lower realization rate means paying less tax. CCEJ said, "If the market price reflection rate for buildings over 100 billion KRW traded in the past four years is raised to only 80%, total property tax would increase by 45 billion KRW, meaning that owners are currently paying that much less tax."

The building with the greatest property tax reduction effect when applying the current official land price versus an 80% realization rate was the ‘Samsung SDS Tower’ in Sincheon-dong, Songpa-gu, traded in 2023. Under the current official land price, the property tax was 1.36 billion KRW, but it jumped to 3 billion KRW when applying an 80% realization rate. Following this were ‘Grand Central’ in Namdaemun-ro 5-ga, Jung-gu (2020, 1.58 billion KRW), ‘Shinhan Investment Securities Tower’ in Yeouido-dong, Yeongdeungpo-gu (2022, 1.44 billion KRW), ‘E-Mart Gayang Branch’ in Gayang-dong, Gangseo-gu (2021, 1.4 billion KRW), and ‘Park One Tower 2’ in Yeouido-dong, Yeongdeungpo-gu (2020, 1.39 billion KRW), showing significant differences in property tax.

CCEJ stated, "If tax standards are arbitrary, citizens cannot help but feel skeptical about tax fairness," and urged, "The official land price realization rate should be consistently raised to over 80%, and the basis and standards for calculating official land prices should be transparently disclosed."