Gangnam homeowners hit hard by taxes

Mr. Choi has been living in the Olympic Seonsuchon Apartment complex in Songpa District, southern Seoul, for the past few years. He was shocked to discover that the Ministry of Land, Infrastructure and Transport’s appraisal of his apartment’s price skyrocketed since last year, going from 640 million won ($595,200) to 800 million won.

“What I am concerned about is the tax burden, which gets heavier along with the price hike,” Choi said.

Choi isn’t the only homeowner fearing big tax bills from the government.

Many apartments in the Korean capital, particularly in the affluent Gangnam Districts of southern Seoul, are seeing drastic hikes in their government appraisals. A 94-square-meter (1012-square-foot) unit on the 25th floor of the Raemian Daechi Palace complex, located in Daechi-dong in Gangnam District, was listed at 1.424 billion won by the Land Ministry, up 23 percent compared to a year ago.

The government posts its nationwide apartment appraisals each year on Jan. 1. The prices are used to calculate homeowners’ tax bills. The prices of two units in the same complex can differ because of reasons like floor level and apartment size. The government aims to appraise apartments at 70 percent of their market value. If an apartment is sold for 1 billion won, the government should assess its value at 700 million won.

The appraisals of some Gangnam apartments have shot up so much that even small apartments now qualify for the comprehensive real estate tax. This tax, which is levied separately from property tax, applies to homes worth more than 900 million won.

The price of a 59-square-meter unit at the Raemian Firstige complex in Banpo-dong in Seocho District, southern Seoul, was assessed at 992 million won in the government data, up 22 percent compared to a year before when it was listed at 816 million won.

Some apartments north of the Han River are also seeing similar increases.

The price of 84-square-meter unit on the 15th floor of the Raemian Oksu Riverzen, located in Oksu-dong in Seongdong District, went up 22 percent to nearly 1 billion won over the past year.

Owners of apartments that are skyrocketing in value may end up paying taxes that are 40 percent higher than a year before.

The owner of a 140-square-meter unit in the Jugong 1 Danji complex in Banpo-dong, Seocho District, southern Seoul will have to pay about 11.23 million won in taxes, according to a simulation from tax accountant Kim Jong-pil.

That’s about 38 percent more than last year, and far exceeds the apartment’s growth in value over that period. The unit rose in price by 29 percent, going from 1.9 billion won last year to 2.3 billion won this year. The price of the 59-square-meter unit at the Raemian Firstige rose by 22 percent, but its tax burden jumped by a whopping 44 percent.

“If the appraisal increase is steep enough, some owners may also be burdened to pay a portion of the difference in tax between this year and last year,” Kim added.

“The tax burden will be heavier for multiple-home owners than single-home owners because the government doesn’t provide them any tax deductions, depending on their age and length of ownership,” explained Won Jong-hoon, a tax specialist at KB Kookmin Bank’s wealth management consulting team.

BY HWANG EUI-YOUNG [choi.hyungjo@joongang.co.kr]