"Reevaluation of the Roadmap for Realistic Public Price Assessment"... Possibility of Abolition Left Open (Comprehensive)

Public Hearing on the Plan to Realize the Actual Value of Real Estate Official Prices
"Limitations Cannot Be Solved by Partial Improvement of the Roadmap"
Reorganization Stalls... Opinions Differ on Maintaining the Roadmap

The government stated that the 'Officially Announced Price Realization Roadmap' (hereinafter referred to as the Roadmap) needs to be reconsidered from the perspectives of necessity and validity. This effectively postpones the reform and leaves open the possibility of abolition.

Lee Yuri, Director of the Real Estate Appraisal Division at the Ministry of Land, Infrastructure and Transport, said at the 'Public Hearing on the Real Estate Officially Announced Price Realization Plan' held at the Korea Real Estate Board Seoul Gangnam Branch on the 20th, "We have been continuously researching to revise the existing realization plan, and during the alternative review process, we judged that partial revisions alone are insufficient to address the issues raised so far," adding, "We plan to examine all alternatives."

On the 20th, a "Public Hearing on the Plan to Realize the Actual Value of Real Estate Official Prices" is being held at the Seoul Gangnam Branch of the Korea Real Estate Board. / Photo by Noh Kyung-jo

The government has been working on lowering the official price realization rate to the 2020 level this year and revising the Roadmap. This is in line with President Yoon Seok-yeol’s pledge, with plans to announce the standards to be applied from 2024 onward in the second half of this year by modifying the Roadmap established by the Moon Jae-in administration.

Previously, the Moon administration announced a realization plan to raise the official price realization rate to about 90% of market prices by 2030 (2035 for detached houses). The target achievement timeline by market price for apartment complexes was set as follows: under 900 million KRW by 2030, 900 million to under 1.5 billion KRW by 2027, and over 1.5 billion KRW by 2025.

However, the government viewed this plan as leading to excessively steep increases in official prices and excessive tax burdens, prompting a revision. Accordingly, it was expected at the public hearing that proposals would be made to lower the realization rate target from 90% to 80% and extend the target achievement year to 2040. However, before deciding whether to revise or abolish the realization rate, the conclusion was that a 'fundamental reconsideration is necessary.'

Song Kyung-ho, Associate Research Fellow at the Korea Institute of Public Finance, who presented at the hearing, stated, "Partial improvements such as lowering the target realization rate within the current official price realization plan framework cannot fundamentally resolve the structural problems of the realization plan or the limitations of implementation conditions," and suggested, "A fundamental reconsideration of the necessity and validity of the Roadmap is required."

Regarding the official price realization rate to be applied next year, he said, "Separate measures are needed considering domestic and international economic conditions and alleviation of public burden." Song forecasted, "This year, housing sale prices are expected to fall by 3.7%, and jeonse (long-term lease) prices by 4.8%. Next year, sale prices are projected to decline by 2.0%, while jeonse prices are expected to rise by 2.0%," adding, "With persistent domestic and international uncertainties and a delayed interest rate cut, the downward trend in sale prices will continue."

He also emphasized the recent sharp increase in household interest expenses and the reduced capacity for consumer spending. According to the Bank of Korea, mortgage loans increased significantly from 4.2 trillion KRW in the second quarter to 14.4 trillion KRW in the third quarter this year. Overall household loans decreased by 14.4 trillion KRW in the second quarter but increased by 10 trillion KRW in the third quarter.

View of downtown apartments from Namsan, Seoul / Photo by Yonhap News

The current Roadmap has been criticized for its structural problem where tax burdens increase if annual tax rate adjustments are not made. The institute estimated that following the realization plan without tax reform would increase the property tax burden on housing by about 34%. It also presented a simulation result showing that among 14.86 million apartment households this year, 1.03 million households (6.92%) experienced an increase in official prices despite a decline in market prices. Song pointed out, "If this continues, the phenomenon where official prices exceed market and actual transaction prices during housing price declines could frequently occur."

Opinions on the necessity of the Roadmap are divided. Kang Chun-nam, an appraiser at Taepyeongyang Appraisal Corporation who participated as a discussant at the public hearing, said, "Since the official prices are announced as a continuation of the previous year rather than separately every year, the Roadmap is essential for predictability."

On the other hand, Jeong Su-yeon, Professor of Economics at Jeju National University, argued, "It is a 'tax increase roadmap' that keeps raising prices regardless of the accuracy of official prices," and insisted, "The current Roadmap, which changes the realization rate every year, should be abolished and a fixed application rate should be introduced."

Officially announced prices are important indicators used as basic data for 67 administrative systems, including property tax, health insurance premiums, basic pensions, and land compensation. When the realization rate decreases, the property tax burden is reduced. The officially announced prices for apartments and multi-family housing confirmed in April this year fell by an average of 18.63% compared to last year, marking the largest drop ever. The Ministry of Land, Infrastructure and Transport plans to announce measures to be applied to next year’s official prices soon based on the discussions at the public hearing.

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