This Year’s Housing Price Surge to Hit Next Year’s Taxes... Han River Belt Apartment Holding Tax to Rise 30-40%

Officially Assessed Values Rise in Gangnam and Han River Belt
Tax Burden Increases Even with Realization Rate Frozen

It is expected that next year’s property holding tax for owners of apartments in the Han River Belt areas-such as Gangnam, Mapo, and Seongdong in Seoul-will increase by approximately 30 to 40 percent. This significant rise in tax burden is due to this year’s sharp increase in housing prices being reflected in the officially assessed value, even though the government is not raising the realization rate or the fair market value ratio.

According to a simulation by Specialist Woo Byungtak of Shinhan Premier Pathfinder on November 4, next year’s property holding tax (property tax and comprehensive real estate tax) for Maporaemian Prugio (84㎡) in Mapo-gu, Seoul, will rise by 39 percent from 2,996,000 won this year to 4,160,000 won. Raemian Oksu Riverzen in Seongdong-gu will see an increase from 3,250,000 won to 4,530,000 won, also a 39 percent rise. Eunma Apartment in Gangnam-gu will jump from 7,040,000 won to 10,050,000 won. Banpo Xi in Seocho-gu is expected to increase by more than 5,000,000 won (40 percent), from 12,750,000 won to 17,900,000 won.

Eunma Apartment in Gangnam-gu, Seoul, where the reconstruction maintenance plan amendment was passed on the 13th of last month, accelerating the reconstruction maintenance project. Photo by Kang Jin-hyung

In particular, this year, semi-high-priced apartments along the Han River Belt are highly likely to hit the tax increase cap (a maximum of 50 percent year-on-year) solely due to market price appreciation. Since the comprehensive real estate tax rate increases for properties with an officially assessed value exceeding 1.2 billion won, if an apartment whose assessed value was around 1.36 billion won this year rises to the 1.6 billion won range next year, the comprehensive real estate tax alone will increase by 1 to 2 million won. On the other hand, complexes with minimal price increases, such as E-Pyunhansesang 1st in Yeongdeungpo-gu, will see tax hikes limited to around 100,000 won.

The Ministry of Land, Infrastructure and Transport plans to hold a public hearing on the 13th to gather opinions on next year’s realization rate (the ratio of assessed value to market price) and the fair market value ratio (the proportion of the assessed value reflected in tax calculations). Minister Kim Yoonduk recently stated at a National Assembly audit that “the realization rate will be frozen next year.” The government has internally decided to maintain the current realization rate for apartment complexes (69 percent) for the fourth consecutive year.

The government’s decision to freeze the rates is influenced by growing public discontent over soaring property taxes for apartments not only in Gangnam but also across the Han River Belt. This move is interpreted as an effort to avoid criticism over the rapid increase in holding taxes ahead of the local elections. A real estate expert commented, “When the officially assessed value rises, it affects not only the holding tax but also health insurance premiums and basic welfare eligibility. Even if the government freezes the realization rate, adjusting the fair market value ratio would cause the tax burden on high-priced homes to surge again.”

In fact, while the Yoon Suk Yeol administration lowered the fair market value ratio for the comprehensive real estate tax from 95 percent during the Moon Jae In administration to 60 percent, if this ratio is raised even to 80 percent, the holding tax for major complexes in Gangnam will soar to the tax increase cap. For example, even if the realization rate is frozen, reflecting only the market price increase for Banpo Raemian Prestige (84㎡) would cause the holding tax to rise by about 32 percent, from around 13 million won to 17 million won, and if the fair market value ratio is adjusted, it could reach as high as 19 million won.