Tax Burden Returns to 2020 Level... Eunma Apartment's Property Tax to Decrease by 1.45 Million Won Next Year

The area around Eunma Apartment in Daechi-dong, Gangnam-gu, Seoul. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporters Minyoung Kim, Wanyong Cha] The government plans to lower the official property price realization rate next year to the 2020 level, significantly reducing the burden of holding taxes. Along with adjusting the realization rate, the government will further lower the fair market value ratio, which was temporarily reduced this year, to ease the tax burden. This measure is interpreted as a response to the increased household economic burden due to rising inflation and financial costs caused by interest rate hikes. The recent trend of house price declines has led to a reversal phenomenon where official property prices exceed actual transaction prices, worsening public sentiment among those receiving comprehensive real estate tax bills.

◆ Official Property Price Realization Rate to Return to 2020 Level = On the 23rd, the government (Ministry of Economy and Finance, Ministry of the Interior and Safety, Ministry of Land, Infrastructure and Transport) announced the establishment of the ‘Revised Plan for Official Property Price Realization’ and the ‘2023 Housing Property Tax Imposition and System Improvement Plan’ to alleviate the national holding tax burden to the 2020 level.

The official property price realization rate varies by individual housing, but the realization rate for apartment-type multi-family housing next year will decrease from 71.5% this year to an average of 69.0%, the 2020 level. By price range, properties under 900 million KRW will drop from 69.4% this year to 68.1% in 2020, those between 900 million and 1.5 billion KRW from 75.1% to 69.2%, and those above 1.5 billion KRW from 81.2% to 75.3%.

Next year, the property tax for single-homeowners, who are actual home users, will also revert to pre-2020 levels considering recent house price declines and the burden on low-income households. Earlier in June, the government amended the ‘Local Tax Act Enforcement Decree’ to reduce the fair market value ratio for single-homeowners from 60% to 45%.

Next year, to further ease the property tax burden on low-income households, the government plans to maintain the policy of lowering the fair market value ratio for single-homeowners and, reflecting the effect of official property price declines due to falling house prices, will reduce it further below 45%. The specific reduction rate will be finalized around April next year after the official property prices are disclosed.

◆ Effect of Official Property Price Decline... Marapu Holding Tax 4.45 million → 3.61 million KRW = Due to the application of a realization rate lower than the roadmap, the holding tax burden is also expected to decrease. According to Woo Byungtak, head of the Real Estate Team at Shinhan Bank WM Consulting Center, applying the 2020 official property price realization rate (fair market value ratio 45%) to an 84.43㎡ unit in Eonma Apartment, Gangnam-gu, Seoul, with a market price of 2.35 billion KRW, the official property price next year is estimated to fall by more than 200 million KRW from this year's official price (1.97635 billion KRW) to 1.76955 billion KRW. If the realization rate follows the roadmap and the fair market value ratio is 45%, the holding tax for this unit next year is estimated at 7.986 million KRW. However, if the realization rate is lowered to the 2020 level, it decreases to 6.532 million KRW.

The initially estimated official property price for an 84.59㎡ unit in Mapo Raemian Prugio, Mapo-gu, Seoul, with a market price of about 1.7 billion KRW, was 1.442315 billion KRW in 2023, but lowering the realization rate is expected to reduce it to 1.291395 billion KRW. Accordingly, the holding tax next year will decrease from 4.458 million KRW to 3.614 million KRW.

For an 84.92㎡ unit in Wangsimni Tenshill, Seongdong-gu, Seoul, the estimated official property price next year was 1.20274 billion KRW applying the roadmap realization rate (78.1%), but lowering it to the 2020 level will reduce it to 1.06568 billion KRW. The holding tax burden next year is also expected to decrease from the initially estimated 3.118 million KRW to 2.441 million KRW.

The initially estimated official property price for an 84.53㎡ unit in Gwangjang Hyundai (Hyundai 5), Seoul, was 1.2496 billion KRW next year, but with the realization rate reduction, it will decrease to 1.172 billion KRW. The holding tax payable will also drop from 3.380 million KRW to 2.584 million KRW.

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