For a 36-year-old Seoulite surnamed Kang, who owns her own home in the capital, following the trends in apartment transaction prices is far from a happy experience.
Over the past year, the value of Kang’s apartment rose by more than twice her annual salary. She has no plans to cash out the property anytime soon. But she may have to pay more taxes than she did last year because her house is worth over 900 million won ($796,073), according to the government’s appraisal.
“Some of my friends often say that I must be happy with the soaring home prices, but I am not when thinking about the tax I have to pay,” she said.
Kang is not the only homeowner facing heavy taxes. Surging apartment values in South Korea have become a bone of contention and higher appraisals are adding fuel to the fire, driving up property taxes considerably.
Data released by the Ministry of Land, Infrastructure and Transport on Monday that publicly assessed the prices of apartment units in the nation grew 19.08 percent on average this year. The double-digit growth is much higher than the increase rates posted during the past several years -- 4.44 percent in 2017, 5.02 percent in 2018, 5.23 percent in 2019 and 5.98 percent in 2020.
Seoul, Gyeonggi Province and Busan recorded increases of 19.91 percent, 23.96 percent and 19.67 percent, respectively. In Sejong, the central city where the government plans to relocate more of its institutions, the officially appraised value of apartments grew a whopping 70.68 percent on average.
Officially appraised home prices serve as the basis for holding taxes, which comprise the property tax and the comprehensive real estate holding tax.
All real estate owners have to pay property tax. The comprehensive real estate holding tax is reserved for owners of multiple homes or those who own a single home valued at more than 900 million won ($796,000).
In November, the ministry announced that it would gradually raise the appraised prices of all types of real estate, including apartments and plots of land, by up to 90 percent of their market prices by 2030 in a bid to make owners of expensive homes and multiple homes cough up higher property taxes. Such strict housing and tax rules, however, have fallen short of stabilizing the heated property market by a wide margin.
Homeowners in regions where appraised home prices have jumped dramatically, particularly those who have one home and have no intention of flipping it for profit, are expected to face a sharp holding tax increase.
The number of apartment units whose publicly assessed value exceeds 900 million won stands at 525,000, or 3.7 percent of the total across the nation. Seoul has 413,000 units, or 16 percent of all apartments, within this price band.
Dodging criticism about the series of ineffective measures to cool down home prices, the ministry explained that homeowners with houses valued at 600 million won or less would not be affected as much because of government measures to lower property tax rates for less expensive houses implemented since November last year.
The number of housing units valued at 600 million won or less stands at 13 million, or 92.1 percent of housing across the nation.
“Since tax reduction of up to 50 percent for houses valued 600 million won or less is larger than the property tax increase for this year, up to 10 percent, homeowners in the price band will pay less holding taxes than they did last year,” the ministry said.
Many homeowners, as well as some civic groups, have expressed frustration over the government’s lack of expertise in handling real estate issues.
Local activists with the Citizens’ Coalition for Economic Justice even accused the government of dramatically raising the appraised value of apartments to collect more taxes from homeowners.
“Homeowners may feel like the government is placing blame on them for soaring home prices by imposing hefty taxes,” said Kwon Dae-joong, a real estate professor at Myongji University.
“I don't know what is wrong with owning a house to have my own space to live. The government treats me like a speculator or con man by imposing a hefty tax on me,” she said.
By Kim Young-won (firstname.lastname@example.org