Next Year’s Real Estate Official Price Realization Rate Frozen Again... Ownership Tax Burden Reflects Market Price Only

Freeze on Realization Rate... Next Year's Property Tax Reflects Only Market Price Fluctuations
"Fundamental Reconsideration of Realization Plan"... Reform Proposal Postponed to Next Year

The official property price realization rate for next year (the ratio of official price to market price) will remain at the 2020 level for the second consecutive year. This corresponds to 69.0% for apartment complexes, 53.6% for detached houses, and 65.5% for land. Accordingly, next year's real estate holding tax will only reflect the fluctuations in market prices.

Apartment buildings in downtown Seoul / Photo by Yonhap News

On the morning of the 21st, the Ministry of Land, Infrastructure and Transport held a meeting of the Central Real Estate Price Public Announcement Committee and deliberated and resolved the 'Plan to Reestablish the Real Estate Official Price Realization Plan.' At the same time, it was decided to fix next year's official price realization rate at the same level as this year.

The Ministry of Land explained, "We judged that increasing the realization rate is unreasonable while fundamentally reviewing the official price realization roadmap (hereinafter referred to as the roadmap). We also comprehensively considered factors such as the persistent macroeconomic and real estate market uncertainties."

According to the roadmap, next year's realization rates should be 75.6% for apartment complexes, 63.6% for detached houses, and 77.8% for land. However, with the freeze decision, these rates will be 6.6 percentage points, 10.0 percentage points, and 12.3 percentage points lower, respectively, compared to the existing realization plan.

The Ministry of Land expects that freezing the realization rate will reduce the tax burden on the public. Official prices are an important indicator used as basic data for 67 administrative systems, including holding tax, health insurance premiums, basic pensions, and land compensation. When the realization rate decreases, the holding tax burden is reduced. The official prices of apartment complexes and multi-family houses confirmed in April this year had an average realization rate 18.63% lower than last year, marking the largest drop ever. Next year's final official prices will be decided early next year, reflecting the real estate market prices at the end of this year.

However, regarding the roadmap revision, it was decided to reexamine the necessity and validity from the ground up. Although the plan was initially to announce the roadmap revision in the second half of this year, the timing has been postponed to the second half of next year.

The Ministry of Land stated, "Partial improvements to the existing realization plan have limitations in bridging the gap with the public's universal perception. We will conduct a research project from January next year to fundamentally reexamine the necessity and validity of the realization plan from scratch, and prepare a fundamental revision plan based on the results in the second half of the year."

The government has been working on lowering this year's official price realization rate to the 2020 level and revising the roadmap. This is in line with President Yoon Seok-yeol's pledge, as the roadmap established by the Moon Jae-in administration was seen to have led to excessively steep increases in official prices and excessive tax burdens, prompting adjustments.

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, this roadmap caused official prices to rise beyond typical expectations by reflecting not only market price fluctuations but also increases in the realization rate, and it did not consider the possibility of rapid changes in the real estate market, resulting in a sharp increase in the public burden.

In response, the Ministry of Land established a roadmap revision plan in November last year and conducted a research project through the Korea Institute of Public Finance in August this year. The results were announced at a public hearing the day before. The conclusion was that partial revisions alone are insufficient to address the issues raised during the review of alternatives to the existing realization plan. Although no direct answer was given, the possibility of abolishing the roadmap was also left open.

The Ministry of Land plans to conduct a public perception survey on the realization plan and official prices, considering the widespread use of official prices, to gain public empathy and trust. Kim Oh-jin, the first vice minister of the Ministry of Land, said, "For the official price system to operate based on fairness and common sense, fundamental review and comprehensive measures regarding the realization plan are necessary. We will reexamine the realization plan from the public's perspective."

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