Comprehensive Real Estate Tax Exemption Up to 1.4 Billion Won... Housing Transactions Expected to Remain Cautious

Exemption of Comprehensive Real Estate Tax for Single-Homeowners + Holding Tax Simulation Shows... 40% Tax Burden Decrease Compared to Last Year
Mapo Raemian Prugio 84㎡, Last Year's Comprehensive Real Estate Tax 550,000 KRW → 0 KRW
Comprehensive Real Estate Tax Deduction Raised to 1.4 Billion KRW... Taxpayers Decrease by 93,000
Temporary Switching Somewhat Active... Housing Market Remains Cautious

A view of an apartment in Seoul / Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporters Minyoung Kim and Taemin Ryu] The Yoon Seok-yeol administration has decided to raise the comprehensive real estate tax (종합부동산세) threshold for single-home households to 1.4 billion KRW and lower the fair market value ratios for property tax and comprehensive real estate tax to reduce the holding tax burden. Market analysts predict that this easing of holding tax burdens will temporarily increase demand for switching homes. However, there are also strong claims that housing transaction stagnation will continue for the time being due to interest rate hikes and additional DSR regulations in July.

According to the "New Government Economic Policy Direction" announced on the 16th, the government plans to reduce the tax burden on single-home households, which surged due to rapid house price increases and official price hikes, back to the 2020 level. To this end, the comprehensive real estate tax deduction for single-home owners will be temporarily raised from 1.1 billion KRW to 1.4 billion KRW this year. The fair market value ratios, which are the basis for calculating property tax and comprehensive real estate tax, will be applied at 45% for property tax (down from 60%) and 60% for comprehensive real estate tax (down from 100%), which is the lowest allowed by enforcement ordinances. Initially, the government planned to apply last year's official prices instead of this year's, but due to delays in revising the Local Tax Special Cases Act, the fair market value ratio will be lowered further from the 75% announced in May. For multi-home owners, the 60% fair market value ratio will also apply, so their comprehensive real estate tax burden is expected to decrease somewhat this year.

Additionally, for couples jointly owning one home, where each spouse currently receives a deduction of 600 million KRW totaling 1.2 billion KRW, if one spouse pays the comprehensive real estate tax as the representative, they can receive a deduction of 1.4 billion KRW this year, the same as a single-home owner. As a result, the number of comprehensive real estate tax payers will decrease from the previous 214,000 to 121,000, a reduction of nearly 93,000 people.

According to an analysis by Woobyeongtak, team leader of Shinhan Bank WM Consulting Center, a single-home owner with a 112.96㎡ unit in Acro River Park, Seocho-gu, Seoul, is expected to pay a total holding tax burden of about 22.81 million KRW this year, which is about 40% less than last year's 38.09 million KRW. Semi-high-priced units with official prices between 1.1 billion and 1.4 billion KRW will be excluded from comprehensive real estate tax due to the upward adjustment of the tax threshold. For example, a resident of Mapo Raemian Prugio 84㎡ in Mapo-gu paid 550,000 KRW in comprehensive real estate tax last year but will not have to pay any this year. The official price of Mapo Raemian Prugio is 1.382 billion KRW, and with the government's introduction of a special deduction of 300 million KRW for single-home owners this year, it qualifies for the deduction. However, unlike the fair market value ratio, which can be revised by enforcement ordinances, the special deduction of 300 million KRW requires a legal amendment, so its application depends on parliamentary cooperation.

Experts say that while temporary switching demand may become somewhat active, the current cautious stance on housing transactions is expected to continue. The housing market atmosphere, summarized by weakened buying demand due to economic recession, inventory buildup caused by multi-home owners' capital gains tax deferral, and housing transaction stagnation, is expected to persist. Some even believe that with the reduced holding tax burden, homeowners will hold onto their properties rather than rush to sell. Ham Young-jin, head of the Zigbang Big Data Lab, said, "Even with holding tax relief, the fatigue from rising house prices, interest rate hikes, and additional DSR regulations in July will sustain the cautious stance on housing transactions," adding, "Rather than quick sales, multi-home owners may wait and observe market conditions during the capital gains tax deferral period before deciding to sell."

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