Government Mentions Easing Comprehensive Real Estate Tax: How Much Would the Burden Decrease If Implemented?

[Asia Economy Reporter Yoo In-ho] Following the ruling party, Prime Minister Chung Sye-kyun also mentioned the need to ease the comprehensive real estate holding tax (종합부동산세) burden on single-homeowners, increasing the likelihood of raising the tax threshold.

If the current tax threshold for single-homeowners with a publicly announced property price of 900 million KRW is raised, it is expected that many owners of high-priced apartments will see a reduction in their tax burden.

According to government and industry experts on the 12th, a leading proposal for reforming the comprehensive real estate holding tax is to raise the publicly announced price threshold by 300 million KRW to 1.2 billion KRW.

This amount was previously suggested not only by the ruling party but also by the opposition Future United Party during the 21st general election. Especially since the ruling party advocates for a tax rate increase while the opposition calls for easing the burden, there is a sharp confrontation, making it highly likely that both sides will reach an agreement on relief measures for single-homeowners.

There are 309,361 apartments nationwide with a publicly announced price exceeding 900 million KRW this year, accounting for 2.23% of the total. In Seoul, 280,842 apartments exceed 900 million KRW.

In particular, in the three Gangnam districts where high-priced apartments are concentrated, about half of the apartments are subject to the comprehensive real estate holding tax: 88,000 units (53%) in Gangnam, 63,000 units (51%) in Seocho, and 54,000 units (28%) in Songpa. The proportion of taxable homes in the Gangnam 3 districts was about 40% last year. This year, the number and proportion of taxable households increased as the sharply rising house prices last year were reflected in the publicly announced prices.

If the tax threshold is raised to 1.2 billion KRW, the biggest beneficiaries are expected to be apartments priced around 1.7 billion KRW on the market. The publicly announced price is determined at about 70% of the market price.

This means that small to medium-sized apartments in the Gangnam 3 districts of Seoul and medium to large apartments in the Mapo and Seongdong districts are the main beneficiaries.

In fact, according to a simulation by Woo Byung-tak, team leader of Shinhan Bank's Real Estate Investment Advisory Center, the publicly announced price of 1,077 million KRW for an 84.59㎡ (exclusive area) unit in Ahyeon-dong, Mapo-gu's "Mapo Raemian Prugio" means that under the current standard, the holding tax including property tax and comprehensive real estate holding tax this year would be 3.24 million KRW. However, if the tax threshold is raised to 1.2 billion KRW, only property tax will be imposed.

However, ultra-high-priced apartments in Gangnam such as "Acro River Park" and "Raemian Prestige" in Banpo-dong, Seocho-gu, and "Raemian Daechi Palace" in Daechi-dong, Gangnam-gu, will not see a reduction in tax burden even if the publicly announced price threshold is raised.

For example, the 112.96㎡ unit in Acro River Park has a comprehensive real estate holding tax of 9.76 million KRW and a total holding tax of 22.48 million KRW, which remains the same even if the threshold is changed.

This is due to the application of the tax burden cap. The publicly announced price of this apartment surged about 24.8% from 2.48 billion KRW last year to 3.097 billion KRW this year.

The comprehensive real estate holding tax is capped at 150% of the previous year's tax regardless of how much the publicly announced price increases. If the tax threshold is raised to 1.2 billion KRW, the tax is calculated based on the amount exceeding 1.2 billion KRW from the 3.097 billion KRW publicly announced price. Although the deduction amount increases by 300 million KRW, the overall tax burden remains unchanged.

However, easing the comprehensive real estate holding tax burden for single-homeowners is expected to be possible only next year. Since easing the tax was virtually off the table in the 20th National Assembly, this year's tax (imposed as of June 1) will be levied according to the current tax law.

Lee Eun-hyung, senior researcher at the Korea Institute of Construction Policy, said, "The only policy that can be immediately addressed regarding the comprehensive real estate holding tax is to ease the tax threshold up to 1.2 billion KRW for single-homeowners. If the tax threshold increase becomes a reality, it is highly likely to influence buyers' decision-making. While a tax rate reduction for single-homeowners is possible, the timing remains uncertain."

This content was produced with the assistance of AI translation services.