[Q&A] "Gongsi Price Realization Plan to Be Reconsidered from Scratch Including 'Abolition'"

Research Project to Start in January Next Year, Revision Plan to Be Prepared in the Second Half

On the 21st, the Ministry of Land, Infrastructure and Transport announced that it will freeze the real estate official price realization rate (the ratio of official price to market price) at the 2020 level again next year, following this year. This corresponds to 69.0% for apartment complexes, 53.6% for detached houses, and 65.5% for land.

Kim Oh-jin, the 1st Vice Minister of the Ministry of Land, Infrastructure and Transport, is holding a briefing on the announcement of the 2024 real estate official price realization rate on the afternoon of the 21st at the Government Sejong Complex. / Photo by Yonhap News

It also stated that it will reconsider the official price realization roadmap (hereinafter referred to as the roadmap) from scratch. There are speculations that this effectively means scrapping the roadmap established by the Moon Jae-in administration in November 2020.

The Ministry of Land said that partially revising the roadmap has limitations in addressing the issues raised so far, and that it will reconsider including options to scrap the roadmap. The related research project will begin in January next year, and after conducting public perception surveys, a fundamental reform plan will be prepared in the second half of the year.

Q&A with Ministry of Land officials including First Vice Minister Kim Oh-jin, Director General of Housing and Land Policy Jin Hyun-hwan, and Land Policy Officer Nam Young-woo.

- The reconsideration of the official price realization plan is a presidential pledge and a national agenda, but why is the research project starting next year instead of immediately, after doing nothing so far?

▲(Vice Minister Kim) Since the second half of last year, we have been intensively reviewing the overall issues of the realization plan. We gathered various opinions through experts and research projects, but we thought that partial revisions alone would have limitations in creating a realization plan that is fair and reasonable. After much consideration, we concluded that a reconsideration was necessary.

- Does a full reconsideration of the realization plan mean looking at the entire system, not just the numbers?

▲(Vice Minister Kim) “It means that instead of presenting alternatives and conclusions in advance and fitting them, we will reconsider from scratch the public perception level, real estate market, and excessive target levels overall. It is not aimed at scrapping the plan.”

- Is the repeated reconsideration following last year intended to scrap the official price realization plan?

▲(Director Jin) There has been ongoing controversy about the realization plan. Many people perceive that the plan raises official prices to the target level relative to market prices. They think that the official price is determined by reflecting the realization plan in addition to the annual real estate price fluctuations. There are suspicions that the government is setting policy prices additionally for the purpose of tax increases. Therefore, we intend to check whether the realization plan matches public perception and whether there are issues with fair taxation or equity, and naturally, scrapping is included in this. If scrapped, we plan to comprehensively review what alternatives exist.

- The law requires the Ministry of Land to establish a realization plan every year. Does this mean scrapping the law itself?

▲(Director Jin) We cannot pre-judge scrapping. However, if it is necessary to scrap the realization plan, we will definitely propose a bill to amend the law. What I am saying is that we are not preparing an improvement plan within the current legal system, but preparing a comprehensive and fundamental new plan.

- Will the 2025 official prices be based on the new system? If the new plan is not prepared, will the 2020 realization rate be applied again?

▲(Director Jin) We already have our own alternatives. We expect to announce them at least by July or August next year. The research institutions have not been decided yet. Since public perception surveys will also be conducted, several institutions will collaborate.

- If the measure is to reduce excessive tax burdens, wouldn’t lowering the realization rate be sufficient?

▲(Director Jin) We adjusted the realization rate to the 2020 level. Housing prices have turned to an upward trend since May this year, but the average growth rate is in the 0% range, not much different from last year. Land prices are the same. Therefore, assuming no change in the fair market value ratio, the holding tax burden based on official prices alone is expected to have little change from this year. The simple answer is that since the realization rate is the same as this year, it is adjusted only by the market price fluctuation rate during the year.

- Housing prices have risen mainly for high-priced and newly built apartments. Wouldn’t owners of such houses face increased tax burdens?

▲(Officer Nam) The level of price increase and fluctuations for individual houses are not uniform. It is difficult to assert that official prices will rise uniformly next year. Price increases for high-priced houses seem to exist, so applying the current realization rate will not exclude upward factors.

- Does the Ministry of Land currently view that official prices should be realized close to market prices?

▲(Director Jin) We believe that blindly raising official prices relative to market prices is not the best approach. Since official prices are announced once a year and prices fluctuate in the meantime, we are considering what an appropriate official price ratio to market prices would be at a predictable level.

- Isn’t the realization rate actually functioning as a discount rate? Is it correct to say the government is increasing tax burdens additionally?

▲(Director Jin) The realization plan is not a discount but a premium. It was not originally planned but introduced in November 2020 to raise official prices to match market prices. The government intends to review whether this is appropriate.

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