[The Editors' Verdict] Nine One Hannam Must Be Classified as a Luxury Residence

Nine One Hannam is the most expensive residential property in South Korea. In July last year, a 273㎡ (duplex type) unit was sold for 22 billion KRW. Based on last year's average apartment prices, this amount is enough to buy 17 apartments of 32 pyeong (exclusive area 84㎡, approximately 1.2 billion KRW each) and still have money left over.

The size of the units is also exceptional. The main unit types here are the duplex exclusive 273㎡ (82.72 pyeong) and 244㎡ (73.93 pyeong) models. It is equipped with top-notch security and privacy protection facilities. The clubhouse is operated by the Plaza Hotel, where residents can enjoy weekday breakfasts and weekend brunches.

In fact, in luxury housing, the residents are more important than the facilities. This aspect is also impressive. Residents include Huh Joon-hong, CEO of Samyang Trading and fourth-generation heir of the GS Group; his cousin Huh Chi-hong, Executive Director of GS Retail; Cho Hyun-sik, eldest son of Cho Yang-rae, Honorary Chairman of Korea & Company Group (formerly Korea Tire Group) and former advisor; and Cho Hyun-beom, chairman and younger son. Also living here are G-Dragon, known as the "celebrity of celebrities," and global stars Jimin and RM of BTS.

In every respect, Nine One Hannam is a luxury residence. However, recently the Seoul Metropolitan Government issued a statement declaring "Nine One Hannam is a luxury residence." One might wonder why such an obvious statement was made. But the reality is that it was not so obvious, which prompted the statement.

The city classified this place as a luxury residence and applied a heavy acquisition tax rate to Daishin Property, the developer of Nine One Hannam, and the buyers. When classified as a luxury residence, an additional 8% surcharge is added to the general tax rate (2.8?4%), resulting in an acquisition tax rate of 10.8?12%. The developer filed an appeal with the Tax Tribunal against the city. The tribunal ruled in favor of the developer, and the city responded with this statement.

The tribunal judged that the luxury residence surcharge should be based on "area" and "price," but since the area criterion was not met, it was considered a general residence. The two main unit types at Nine One Hannam (273㎡ and 244㎡) fall short by 1㎡ each of the luxury residence area standard. According to the Local Tax Act, a residence is classified as luxury if the net floor area excluding common areas exceeds 245㎡ (274㎡ for duplexes) or if the official assessed value (or publicly announced price if available) exceeds 900 million KRW.

The city was aware of this. However, it pinned its hopes on the developer's sales practices. The city viewed the subdivision of legally common spaces such as parking lots and storage rooms, along with the installation of partition doors to restrict access to individual households, as effectively providing exclusive area.

However, the tribunal ruled that there is no separate legal definition for common areas, and since parking lots and storage rooms are considered common areas in official records, the surcharge on acquisition tax was canceled. Following this ruling, the city refunded 80 billion KRW in surcharges to the developer and others. Including the buyers' share of 120 billion KRW, the total cancellation amount reaches 200 billion KRW.

This issue is not unique to Nine One Hannam. Most ultra-luxury residences in Seoul that anyone would recognize are classified as general residences. Examples include Hannam The Hill (244.75㎡), The Penthouse Cheongdam (PH129, duplex type 273.96㎡), Acro Seoul Forest (duplex type 273.92㎡), and Poseys Hangang (244.77?244.99㎡), all of which are subject to general tax rates. This contrasts with ordinary people who purchase homes in the outskirts of Gyeonggi Province for retirement and rural living (net floor area 332㎡, official assessed value 1 billion KRW) and are taxed at luxury residence rates.

The law needs to be amended as soon as possible. Currently, a bill has been proposed in the National Assembly to calculate the luxury residence surcharge based on "value" rather than "area." The National Assembly should act to increase tax revenue while ensuring the legitimacy of taxation, achieving a win-win outcome.