160 million won in property tax for 40·23 pyeong units... '1+1 Reconstruction' suffers losses trusting the government

Reconstruction Created to Protect Original Residents

Faced with Triple Tax Burden or Selling One Unit

Union Members Express Withdrawal Intentions One After Another

Basic Purpose of Stabilizing the Jeonse Market Fades

[Asia Economy Reporter Kim Min-young] "Either face a billion-won level holding tax bomb or sell the newly acquired home with great difficulty."

From this year, as the holding tax burden such as the comprehensive real estate tax for multi-homeowners has sharply increased, reconstruction union members in the Gangnam area who chose the ‘1+1 pre-sale’ are expected to pay taxes exceeding 100 million KRW. In particular, for small housing units supplied for rental purposes, the mandatory three-year rental clause makes selling impossible, leading to criticism that the ‘1+1 pre-sale’ policy, which the government created to expand supply, has backfired as a holding tax burden bomb.

The 1+1 reconstruction system allows union members to be allocated up to two apartments within the area range of the house they previously lived in. For example, a union member who owned a large house of 139㎡ (exclusive area) can be allocated two newly constructed apartments of 84㎡ and 55㎡. However, the small housing unit received for rental purposes through the 1+1 pre-sale is subject to a mandatory rental regulation for three years and cannot be sold before that period.

On the 18th, Asia Economy requested Woo Byung-tak, head of Shinhan Bank’s Real Estate Investment Advisory Center, to estimate the holding tax burden for a union member who received the ‘1+1 pre-sale’ and moved into The H Classes apartment in Banpo-dong, Seocho-gu, Seoul. The estimated holding tax for this year is at least 100 million KRW, and next year it is expected to reach about 160 million KRW. Considering that this complex moved in June this year and does not yet have an official price, the holding tax estimate was calculated based on a case owning a 40-pyeong and 23-pyeong unit in the adjacent A complex. It assumed that The H Classes union member who chose the 1+1 pre-sale selected a 41-pyeong + 24-pyeong unit.

According to the simulation, the holding tax for an owner of a 40-pyeong + 23-pyeong unit in A apartment is estimated to reach 102.28 million KRW this year. This amount is more than double the 43.64 million KRW holding tax from last year. Next year, this burden will increase to 163.62 million KRW (applying actual transaction price + official price realization rate of 81.2%). The holding tax that The H Classes union member who chose the 1+1 pre-sale will have to pay next year is expected to be at least similar to or exceed that of the A complex. A representative from a real estate agency in Banpo-dong A said, "I heard that the most selected unit size by The H Classes union members is the 40-pyeong + 24-pyeong combination," adding, "The medium to large units are mostly used for residence, and the small units are mainly for rental purposes."

The problem is that the small apartments used for rental purposes cannot be disposed of due to the mandatory three-year rental regulation. Union members are left with no choice but to bear the billion-won level holding tax or sell the home they painstakingly prepared for actual residence.

Thirty-four union members of this complex have filed a constitutional complaint in the first half of this year. A representative from a nearby A real estate agency said, "The residents of The H Classes will be shocked when they receive the comprehensive real estate tax bill next year."

Because of this, although some chose the 1+1 pre-sale in the Gangnam area, major reconstruction complexes are making changes to their projects. The Sinbanpo 21st Reconstruction Union in Banpo-dong, Seocho-gu, submitted a project plan change to Seocho-gu to reduce the scale of the complex from 275 households to 251 households and adjust the number of households by unit size as union members decided to give up the 1+1 pre-sale. Similarly, 57 union members who applied for the 1+1 pre-sale at the nearby Sinbanpo 15th apartment have expressed their intention to withdraw.

A representative of the Sinbanpo 21st Reconstruction Union said, "There is no source of income in old age, so how can we handle 80 to 90 million KRW in comprehensive real estate tax per year?" He added, "More than 60% of union members wanted 1+1 reconstruction, but due to the holding tax, the agreement rate is less than 20%." This union member said, "We cannot sell for three years and even if we rent out the small unit for three years, it is not enough to cover the taxes," and added, "We had no choice but to reduce the number of pre-sale houses to one."

Seo Jin-hyung, president of the Korea Real Estate Society (professor at Gyeongin Women’s University), said, "As the government emphasizes one household one house and strengthens regulations on rental business operators, side effects such as a reduction in jeonse supply are appearing," adding, "The 1+1 system was originally introduced to stabilize the jeonse market, but due to the conflicting tax strengthening policies, the jeonse supply has rather decreased."

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