Next Year’s Apartment Official Price Increase Will Raise Property Tax Burden

Holders of Gyeonghuigung Xi and Godeok Gracium to Pay Property Tax Next Year

[Asia Economy Reporter Kim Min-young] With the official apartment housing prices expected to rise by double digits again next year, the burden of holding taxes such as property tax and comprehensive real estate tax is likely to increase further. The number of comprehensive real estate tax payers is also expected to increase due to the rise in official prices.

However, with the presidential election next year, there is a possibility that the Democratic Party of Korea, conscious of voter sentiment, may order a slowdown in the price realization process, raising concerns about market confusion.

On the 13th, Asia Economy requested Woo Byung-tak, head of the Real Estate Investment Advisory Center at Shinhan Bank, to estimate the increase in holding taxes assuming that official prices are raised to the level of actual transaction prices in November. As a result, the holding tax for an 84㎡ unit in Banpo Xi, Seoul, for a single homeowner, will increase from 8,112,576 KRW this year to 11,892,672 KRW next year. Owners of an 82㎡ unit in Godeok Gracium, which was not subject to comprehensive real estate tax this year, will have to pay 3.35 million KRW in holding tax next year. Similarly, Kyunghuigung Xi (83㎡), which was excluded from holding tax this year, will have to pay 4.35 million KRW in comprehensive real estate tax next year.

Since official prices are calculated reflecting year-end market prices, the official land prices will increase in line with this year's rise in housing prices, causing a sharp increase in tax burdens for existing single homeowners and an increase in the number of properties subject to comprehensive real estate tax. In fact, the increase rate of official prices for Banpo Xi next year compared to the previous year, reflecting recent market prices, is 34.48%, while Godeok Gracium and Kyunghuigung Xi are 28.89% and 20.20%, respectively.

The reason for the rise in official prices is the recent surge in housing prices. According to the Korea Real Estate Board, the nationwide apartment transaction price index in September rose by 16.95% compared to the end of the previous year. During the same period, the transaction price index in the Seoul metropolitan area, including Seoul, rose by 20.72%, showing a larger increase. Considering that this year's official apartment housing prices rose by 19.08%, close to last year's apartment transaction price increase rate of 16.8%, the estimated average official price increase rate for Seoul apartments next year is expected to be around 20%. In particular, the official price increase rate for individual complexes in Gangnam and some areas of Gyeonggi Province, where apartment prices rose more steeply this year, is likely to exceed the Seoul average, increasing the burden of holding taxes. With the rise in official prices next year, the number of single-household single-homeowners subject to comprehensive real estate tax is also expected to increase. This year, the number of comprehensive real estate tax payers for housing was 947,000.

However, with the presidential election next year, the possibility that the Democratic Party of Korea may put the brakes on price realization cannot be ruled out. As public sentiment worsened due to this year's comprehensive real estate tax burden, the Democratic Party is reportedly working on related measures, including easing capital gains tax for single homeowners and adjusting the fair market value ratio. This is due to concerns that a sharp increase in tax burdens could negatively affect voter sentiment in the presidential election. There are also concerns that if the government and the party show differing positions again on the issue of price realization, as they did over easing capital gains tax for multiple homeowners, it could cause confusion in the real estate market.

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