List price increase rate 19%… Best in 14 years
The realization rate was raised by 1.2 percentage points to 70.2% this year.
Fair market value ratio 95% this year → 100% next year
“Considering to adjust the speed of realization and increase the deductible”
While the total real estate tax announced this year has risen significantly in both the number of people paying and the amount of tax, there is an observation that it will increase further next year. This is because the published price and fair market value ratio, which are used to calculate the property tax, will be adjusted upward. If house prices continue to rise, it is expected that the increase in property taxes will be sharper, centering on multi-homeowners.
According to the Ministry of Strategy and Finance and the National Tax Service on the 23rd, the reason the property tax increased significantly this year is because house prices rose a lot last year and the government’s policy of realizing published prices (reducing the gap between market prices and published prices) overlapped. The property tax is set based on the published price, and there is a slight difference from the market price. For example, last year, the realization rate of the announced price of an apartment house (the ratio of the published price to market price) was 69.0%.
The government is using a policy to gradually raise the realization rate to close the gap between the market price and the published price. This year’s figure was 70.2%, an increase of 1.2 percentage points from the previous year. This year’s announced price had to rise because house prices had skyrocketed last year, but as the realization rate was raised, the national average rose by 19.08% (apartment housing). It was the highest increase in 14 years since 2007. As a result of this, the property tax increased rapidly.
The government has announced that it will continue this policy of realizing published prices until 2030. It announced a roadmap to raise the realization rate by 2-3 percentage points per year to 90% by 2030. Accordingly, the announced price is expected to rise next year, and there is a high possibility that the property tax will also increase.
The government will also raise the fair market value ratio from 95% this year to 100% next year. The tax base (based on which tax is imposed) is calculated by subtracting the deductible amount (600 million won, 1 house per household, 1.1 billion won) from the official price and then multiplying it by the fair market value ratio. Therefore, the higher the fair market value ratio, the higher the property tax.
Seo Jin-hyeong (Chairman of the Korean Real Estate Association), a professor at Kyungin Women’s University, said, “In order to stop the rapid increase in property taxes, we need to consider adjusting the speed of realization of the official price or raising the deductible.” Meanwhile, the Ministry of Strategy and Finance said in a press release on the same day, “Based on the total holding tax including property tax and family tax, the upper limit is applied at 1.5 times for general two houses and three times for three houses or more (two houses in a controlled area).” “Through this system, we are preventing a sharp increase in taxes,” he said.
Reporter Lim Joo-hyung, Sejong hermes@seoul.co.kr
