Drastic Reduction in Comprehensive Real Estate Tax Payers
A staggering 66.6% reduction in comprehensive real estate tax payers has been reported by the National Tax Service. This year, only 410,000 homeowners, representing 2.7% of the total, are subject to comprehensive property tax, compared to 1.2 million last year. This represents the largest decrease since the tax was first introduced in 2005, with a corresponding reduction in tax revenue from 3.3 trillion won to 1.5 trillion won. The government attributes this drop to the normalization of the real estate tax system, including a decrease in publicly announced prices, an increase in the basic deduction amount, and a reduction in the tax rate.
Concerns Over Malignant Unsold Units
Statistics from the Ministry of Land, Infrastructure and Transport reveal a concerning trend of ‘malignant unsold units,’ with over 10,000 households remaining unsold even after the completion of flats. This figure has seen a 7.5% increase in just one month, raising the total to 10,224 households. It is feared that this increase in unsold properties is causing uncertainty in the real estate market.
Termination of Construction Contract for Sanggye Jugong Complex 5
The Sanggye Jugong Complex 5, which was undergoing a reconstruction project in Nowon-gu, Seoul, has seen the termination of its construction contract with GS Engineering & Construction. The decision was made due to dissatisfaction with the residents’ contribution totaling 500 million won and the lengthy construction period of 48 months. This leaves the future of the complex uncertain, with concerns over the potential rise in additional costs due to the termination and re-selection of the construction company.
1. You don’t even pay money?… A third of those subject to comprehensive real estate tax
2. The flats were all built, but the house is empty … ‘Unsold malignant units’ were more than 10,000 households
3. What happened to Sanggye Jugong Complex 5, where the construction company was terminated?
You don’t even pay money?… A third of those subject to comprehensive real estate tax
Have you received the comprehensive real estate tax payment notice sent by the National Tax Service? So, you are in the 2.7% of homeowners. The number of people paying comprehensive property tax was cut by a third from 1.2 million last year to 410,000 this year. This is said to be the biggest reduction since 2005, when the comprehensive real estate tax was introduced. The tax amount is also reduced by half, from 3.3 trillion won to 1.5 trillion won.
The Ministry of Strategy and Finance explained on the 29th of last month that this is the result of the normalization of the real estate tax system, including a reduction in publicly announced prices, an increase in the basic deduction amount, and a reduction in the tax rate . By revising the tax law last year, the government decided not to impose taxes on households with one home if the publicly announced price is less than 1.2 billion won. A married couple who jointly own a house can receive a basic deduction of up to 1.8 billion won. Due to the fall in house prices, the publicly announced price also fell, further reducing the amount subject to taxation.
This year, the tax burden of 780,000 people was reduced. A single householder who owns an 84㎡ flat specially for ‘Mapo Raemian Prugio’ in Mapo-gu paid 850,000 earned last year, but did not pay this year. According to the Ministry of Land, Infrastructure and Transport, in August, only 84㎡ for ‘Maraepu’ was traded for 1.8 billion won. The price announced this year has won about 1 billion. I benefited greatly from the increase in the basic deduction amount from KRW 900 million to KRW 1.2 billion.
For a homeowner who owns an Eunma Apartment in Gangnam-gu of the same size, the comprehensive real estate tax was greatly reduced from 2 million won to 420,000 won. According to the Ministry of Land, Infrastructure and Transport, only 84㎡ for Eunma was traded for 2.8 billion won in October, and the price announced this year is about 1.5 billion won. If a couple owns a house jointly, the comprehensive real estate tax is 0 earned.
It seems like a comprehensive real estate tax is still a story from another country. It’s sad that I’m going to lose my glass wallet again this year.
I built all the flats, but the house is empty … ‘Malignant unsold units’ were more than 10,000 households
Landlords are usually recruited by subscription before flats are fully built. The number of so-called ‘malicious unsold units’ which remain unsold even after completion has exceeded 10,000 households in 2 years and 8 months since February 2021. According to ‘Statistics October Houses’ published by the Ministry of Land, Infrastructure and Transport on the 30th of last month, the number of unsold houses at the end of October was 58,299 households. Among these, the number of unsold units after completion increased by 7.5% (711 households) in one month to 10,224 households.
There were 1,954 households in the metropolitan area and 8,270 households in rural areas, an increase of 6.4% and 7.7%, respectively. Seoul’s unsold homes are no exception with 408 households. At the end of 2021, there were only 52 households, but after reaching a peak of 340 households at the end of last year and 484 households in June, the number has been at the level of 300 to 400 households.
Unsold houses were concentrated in Gangseo-gu (151 cases), Gangdong-gu (96 households), Gangbuk-gu (69 households), and Gwangjin-gu (38 households). Gangbuk-gu’s ‘Kantaville Suyu Palace’, which started moving in in June last year, still has 69 homes left (as of the end of September). Gwangjin Park House’ (35 households) has not moved in either. There are many empty houses.
Why not just sell it cheap? There is a lot of opposition from residents who paid full price, and there are concerns that house prices will not rise due to the stigma effect of ‘discount sales = flats that don’t sell.’ Experts warn that the increase in unsold properties means that uncertainty in the real estate market is growing. It’s time to ‘choose the best’ for a house in a good location and at a good price by carefully examining the sale price and the atmosphere of the subscription market.
What happened to Sanggye Jugong Complex 5, where the construction company was terminated?
Sanggye Jugong Complex 5, which was the subject of a reconstruction project in Nowon-gu, Seoul, has recently terminated its construction contract with GS Engineering & Construction, causing noise. GS Engineering & Construction was finally selected as the construction company for this complex in January this year. On the 25th of last month, a general meeting of the owners was held, and the decision was made.
The key reason is dissatisfaction with the residents’ contribution totaling 500 million won and the construction period of 48 months. Sanggye Jugong Complex 5 was a 5-story apartment with 840 households covering only 31.98㎡ (11 pyeong). The intention was to rebuild it with up to 35 floors and 996 homes. Considering the 152 public rental units, there is almost no overall sales volume.
Due to poor business feasibility, you have to pay more than 500 million won to receive 84㎡ for national flat use. According to the real transaction price disclosure system of the Ministry of Land, Infrastructure and Transport, this complex has been trading for about 500 million won since August. I think it would be a bit of a burden as the contribution is higher than the market price. The owners asked for a shorter construction period, but the contractor said it would be difficult because there was a school nearby.
In the end, the contract was canceled and the complex was looking for a new contractor. GS E&C announced it would review legal proceedings for the return of deposits and input costs, and claims for compensation. Construction costs are already skyrocketing, and there is a possibility that additional costs could rise due to the termination and re-selection of the construction company. It seems that finding a new construction company is not easy. When will the new flats be built?
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