Property taxes likely to rise this year: Ministry

Property taxes are expected to rise in some parts of the country this year as a reflection of rising housing price standards, which were detected in recent surveys conducted nationwide that are used to calculate the taxes.

The Ministry of Land, Transport and Maritime Affairs made public the standard prices of 190,000 detached houses across the country yesterday, including those in an affluent area of southern Seoul and in central Seoul’s Yongsan District, two areas that are particularly sensitive to speculation.

It found that the standard prices of detached houses rose 5.38 percent on average last year. Broken down by city or region, they rose 5.5 percent in Gyeonggi, 6.1 percent in Incheon, 6.6 percent in Seoul and 8 percent in Ulsan.

Standard prices are calculated for administrative purposes and are far lower than actual trading prices, sometimes falling below 50 percent of the property’s true value. Apartments are not included in the calculations.

The ministry said the rising trend looks set to continue this year.

Meanwhile, the standard cost of a detached house in Geoje Island, where major shipyards are located, rose by a whopping 18.3 percent. This was followed by Gangseo District in Busan (11.8 percent); Ulsan’s Dong District (11.8 percent); Changwon’s Uichang District, in South Gyeongsang (11.3 percent); and Yongsan District in central Seoul (10.9 percent).

The ministry said it raised the standard prices in Ulsan, Seoul and Incheon by larger degrees than in other places in a bid to reflect actual trading prices. The prices in these three cities account for just 44.8 percent, 45.3 percent and 48.1 percent of their actual prices, respectively, it added.

According to the ministry and Won Jong-hun, a tax accountant at Kookmin Bank, the standard price of a detached house in Mok-dong, Yangcheon District, western Seoul, jumped 9.4 percent from 904 million won ($805,000) in 2010 to 989 million won last year.

Won said a homeowner in this district who paid 1.5 million won in property and consolidated real estate taxes last year would have to fork out 1.7 million won this year, a rise of 13.3 percent.

“Property tax increases vary by region, but for houses priced between 300 million won and 600 million won, taxes will increase between 8 percent and 9 percent, while more expensive properties are likely to see taxes rise by around 12 percent,” a ministry official said.

“Although we saw the standard prices of properties in Geoje, Busan’s Gangseo District and Ulsan’s Dong District jump by double-digit percentages last year, the property tax increases are expected to be minimal because the actual prices of most of the houses in those areas were below 300 million won,” Won said.

“However, there are many more expensive properties in Seoul’s Jongno, Yongsan, Gangnam and Seocho districts, so the owners of these houses will probably see a steep rise in property taxes.”

Additionally, the government lifted restrictions on land transactions for plots of 1,244 square kilometers (307,399 acres) or less, as real estate speculation on plots of this size grew by a mere 1 percent on average in the last three years.

By Limb Jae-un [jbiz91@joongang.co.kr]