The total real estate tax in Seoul has increased 2.3 times from 1.18 trillion won last year to 2.776.6 trillion won this year. Incheon and Gyeonggi increased 5.3 times and 4.4 times, respectively. Chungbuk and Gwangju also jumped 8.8 times and 7.5 times, respectively. In the real estate agent’s office in Gangnam, Seoul, the phrase ‘Consultation of transfer tax and property tax’ is attached. News 1
Controversy over the tax on property tax (comprehensive real estate tax) is hot. One side resents it being a bomb, and the other side hears the sarcasm of ‘only’. Aside from the evaluation of the property tax, it is quite inconvenient for homeowners who pay unexpected taxes due to the property tax. It is said that the subject of the slave tax is 2% of the people, but this is clearly an incorrect interpretation of statistics.
According to an analysis by one media outlet, the number of households paying the property tax is 8.1% nationwide. If it is limited to Seoul, one out of four households with residential units pays tax. The number that this statistic correctly calculated for the population and sample. Homeless people don’t even pay property taxes, and counting them all as a population is a classic statistical massage. It is to interpret the derived statistical results in their favor.
Real estate statistics massage by this government has become routine. The reasons for manipulating and distorting statistics like this are obvious. Because it doesn’t perform well, they exaggerate because they want to make a performance, or, conversely, they make absurd interpretations to hide the bad results. A government without trust has no future. There are not many home buyers who believe in this government and wait 5 or 10 years until the 3rd new city moves in. It is truly regrettable that the government, which is risking its life and death for housing supply, continues to make announcements that lose confidence in the real estate market.
The most common way to forecast the price movement of real estate is to fill the gap. In most cases, the leading apartment goes up first, followed by the next-ranked apartment. Whether or not to follow a similar level depends on the future value of the next-ranked apartment. Given that there are not many people who want to sell their house due to the burden of the property tax, the transfer phenomenon due to the property tax will get worse.
There are two directions. The first will be passed on to the price. In the case of a residential area, the price will not be adjusted as demand is supported, but rather the tax burden will be reflected in the price. Naturally, the price will rise as much as the estate tax. The second is passed on to the lessee. The recent rapid increase in the conversion from jeonse to monthly rent is not only affected by the existing lease law and regulations on jeonse loans, but is also not unrelated to the rapid rise in property taxes, such as property taxes.
Classified tax bills prior to shipment. / Photo = News 1
Even homeowners who had never been concerned about capital gains taxes before this government took office are now paying them. The Blue House and the government, triumphant that they have already warned, are in charge of the tax bomb. It is to hold the people responsible for the rise in house prices due to the wrong policies of the current government. Even those who are not interested because they do not pay the tax will soon be subject to the tax. This is because the taxation standard is set by raising all three of the tax rate, the fair market value ratio, and the announced price. Considering the official price calculated as of January 1 and the current rise in apartment prices, the subject of next year’s property tax is bound to increase significantly more than this year. This means that sooner or later, most of the households who own apartments in Seoul will be paying the estate tax.
Those who say, ‘I don’t care because I’m homeless’ should reconsider whether this is really the case. Homeless people are deeply involved in the housing market, unlike people who don’t own stocks and have nothing to do with the stock market. Because we have to live at home unconditionally. As tenants, they are participating in the housing market with the position and role of cheonsei, monthly rent, or in-between (half-jeonse, monthly rent with guarantee). Therefore, such a homeless person is not in a neutral position, but in a short position (a state in which stocks, currencies, futures, options, etc. have been sold). As house prices go up, you have no choice but to bear the damage. Tenants are the biggest victims in the rental market, which is rapidly changing from jeonse to monthly rent. Although more than half of the leasehold tenants become homeowners, it is rare for monthly renters to become homeowners. The monthly rent makes it difficult to accumulate assets. The rental market, which changes from jeonse to monthly rent, is in the process of removing the housing ladder for homeless people.
Those who supported this government will suffer the most. The government seems to know this already. The surge in the price of jeonse and the shift from jeonse to monthly rent are more painful for homeless tenants, not landlords. Nevertheless, the last resort of the government, unwilling to change its policy stance, is statistical massage. Major OECD countries are said to have significantly reduced real estate-related taxes, such as real estate ownership tax and transaction tax, after the COVID-19 outbreak. In Canada, property tax cuts last year averaged 25%. The whole world is lowering real estate taxes to share the pain, but only Korea is going backwards. Where is the current government’s real estate policy headed?
<한경닷컴 The Moneyist> Hyung-seok Shim, Director, Preferential Bread Research Institute, Professor, IAU, USA
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