Gangnam Apartment Up 2 Billion Won, Property Tax Rises by 4 Million Won [Real Estate AtoZ]

Market Reflection Rate for Publicly Announced Prices Frozen
Property Tax Surges in Three Gangnam Districts
Government Signals Overhaul of Price Disclosure System

The government has decided to maintain the current market reflection rates, which serve as the basis for calculating next year's officially assessed real estate prices, at the same level as this year. Instead, a new method for reflecting market prices will be developed through a research project that will run until next year. However, due to the sharp rise in housing prices this year, the property tax burden in key areas such as the three districts of Gangnam is expected to increase significantly.

Yonhap News Agency

On the 13th, the Ministry of Land, Infrastructure and Transport convened the Central Real Estate Price Disclosure Committee to review and approve these measures. The market reflection rates will remain at 69.0% for apartment complexes, 53.6% for standard houses, and 65.5% for standard land, as in the current year. Under the Moon Jae-in administration, these rates were set to gradually increase, with targets of 80.9%, 70.0%, and 83.9%, respectively. However, the Yoon Suk Yeol administration announced plans to revise the law under the pretext of "rationalization," reverting the rates to 2020 levels. Since the law has not been amended, the Ministry of Land, Infrastructure and Transport has been determining the applicable rates each year through separate reviews.

Soaring Property Taxes, Surging Home Prices

Although the market reflection rates remain unchanged, the property tax burden is expected to rise, particularly in the three districts of Gangnam in Seoul, where apartment prices have clearly increased. According to the ministry's estimates for major complexes, the officially assessed price for a 78-square-meter unit at Acro River Park in Seocho-gu, Seoul, will rise from 2.723 billion won this year to 3.284 billion won next year. This projection assumes that the rate of price change will remain at last year's level. The property tax (including property tax and comprehensive real estate tax) paid this year was 12.04 million won, but it is expected to increase by about 33% to 15.99 million won next year.

For a 111-square-meter unit at Shinhyundai 9th Complex in Apgujeong-dong, Gangnam-gu, the officially assessed price is projected to rise by about 26% to 4.378 billion won next year. Based on this, the property tax will increase from 18.58 million won to 26.47 million won. The comprehensive real estate tax alone will increase by more than 7 million won. If the officially assessed price for an 84-square-meter unit at Jamsil Els in Songpa is assumed to rise to 2.133 billion won, the property tax will jump from 5.82 million won to 7.12 million won.

The officially assessed price for an 84-square-meter unit at Maporaemian Prugio is expected to be 1.511 billion won, with a property tax of 3.55 million won (up 23% year-on-year). For an 84-square-meter unit at Hangaram Apartment in Yongsan, the officially assessed price is projected to be 1.805 billion won, with a property tax of 5.52 million won (up 16%), according to the ministry's estimates.

These estimates are based on the assumption that the rate of price increase will match last year's level. Since the rate of increase is actually higher this year, the real burden is expected to rise further. According to the Korea Real Estate Board, the apartment price increase rate from the beginning of this year through the second week of November is 7.27%. During the same period last year, it was 4.25%.

Compared to the rise in home prices, the increase in property tax is relatively modest. For example, the actual transaction price for a 78-square-meter unit at Acro River Park, where the property tax is expected to rise by about 4 million won, increased from 2.97 billion won in March last year to 4.82 billion won in March this year, a jump of nearly 2 billion won. For a similar-sized unit at Shinhyundai 9th Complex in Apgujeong, the property tax is expected to rise by nearly 8 million won, while the actual transaction price increased from 4.9 billion won in November last year to 7.2 billion won in November this year.

Market Reflection Rate to Be Set Every Five Years

The government has also decided to overhaul the system for calculating officially assessed prices before it is too late. The Korea Research Institute for Human Settlements is in charge of the related research project. At a public hearing held prior to the committee meeting, the general direction of the reform was disclosed. The current calculation method, "market price × market reflection rate," will be retained, but the concepts of market price and market reflection rate will be more clearly defined. The market price serves as the basic market value for calculating the officially assessed price, while the market reflection rate acts as an index for the stable operation of the official price system.

Even if the officially assessed price should reflect market value, the government will also consider fairness between different regions. The difficulty of accurately determining market value in practice will also be taken into account. To ensure public acceptance, the adjustment range will be limited to within 1.5% per year. To enhance stability and predictability, a proposal was made to set the market reflection rate in five-year intervals, corresponding to the medium-term real estate cycle.

The previous plan, finalized during the Moon Jae-in administration, was a 15-year roadmap, and reverting to a previous point in time, as under the Yoon Suk Yeol administration, is also considered only a temporary measure. Director Park pointed out, "Whether the tax burden will increase or decrease in the future has become a topic of social debate every year, greatly influenced by public opinion on officially assessed prices depending on market conditions, which has undermined the credibility of the system. In the past, long-term goals were applied rigidly, but recently, the lack of concrete goal-setting has reduced the predictability of policies."

Since the officially assessed price affects not only the tax system but also 67 administrative systems, including health insurance, basic livelihood security, and scholarships, the government has decided to listen to opinions from all sectors and revise the system. Professor Jung Suyeon of Jeju National University commented, "If officially assessed prices rise after next year, tax resistance will intensify, so there needs to be a clear rationale to persuade the public."

Jo Jungheun, Chair of the Land and Housing Committee at the Citizens' Coalition for Economic Justice, stated, "For apartments that have seen transaction prices rise by 1 billion won in just one year, it is questionable whether a few transaction data points can be considered the true market value. The purpose of officially assessed prices is to curb speculation and ensure fair taxation by setting appropriate prices, so it is necessary to carefully consider whether it is appropriate to determine these prices based on speculative demand."