Owners get hefty tax bill as property prices rise
But the ever-rising home prices aren’t necessarily good news for home owners in the region, which encompasses the southern Gangnam, Songpa and Seocho Districts, as they are likely to face much heftier tax bills.
An 84-square-meter (904-square-feet) unit in the Jamsil L’s apartment complex in Jamsil-dong, Songpa District, was being sold for around 1.65 billion won ($1.53 million) in February and March, up about 400 million won in just a year. The rise in trading price meant an increase in the government assessed value of the apartment.
The average price of an 84-square-meter unit in the Jamsil L’s complex was 1.02 billion won as of Jan. 1 this year, according to the government. This is a 26.7 percent increase from a year earlier when the government valued the apartments at an average 880 million won.
The Ministry of Land, Transport and Infrastructure assesses and posts the values of apartments at the start of each year. These valuations are used to calculate tax bills.
The increase in valuation means that the amount of tax that homeowners in the Jamsil L’s complex need to pay has shot up 41 percent, from 2.25 million won last year to 3.17 million won.
“Others tell me that I must be happy about the recent price increase, but for me, it is money that I cannot get my hands on and all I am left with is a bigger tax bill,” said a resident of the apartment complex.
The government-assessed apartment prices showed the most drastic hike since 2007 this year. In the Gangnam region the value shot up by more than 20 percent on average.
According to Won Jong-hoon, a tax specialist at KB Kookmin Bank’s wealth management consulting team, a 76-square-meter unit in Jugong 5 Danji, Jamsil-dong, Songpa District, saw its value jump by 25.2 percent from 920 million won last year to 1.15 billion won this year. A single-homeowner who owns the unit would need to pay 3.97 million won in tax, up 47 percent from last year.
Along with residents of those areas, homeowners whose apartments’ value exceeds 900 million won for the first time could also be slapped with a steep tax bill, as much as 50 percent higher than last year.
In Korea, single-homeowners with apartments valued at over 900 million won must pay the so-called comprehensive real estate tax, which is levied separately from property tax. Multi-homeowners must pay the comprehensive real estate tax if one of the apartments they own is valued higher than 600 million won.
The data from the Land Ministry showed that the number of apartments valued higher than 900 million won this year was 140,807, about 50,000 units more than last year.
A 76-square-meter unit in Eunma apartment complex in Daechi-dong, Gangnam District, was valued at 800 million won last year. In just a year, the unit’s price rose by 14 percent to 912 million won. The owner of this home will now have to cough up 2.66 million won in taxes, about 20 percent more than last year.
In an attempt to downsize the tax burden on the public due to rising real estate prices, the government capped tax increases.
The rise in tax for an apartment listed below 300 million won, for instance, is limited to a 5 percent increase compared to the previous year.
For apartments valued from 300 million won to 600 million won, the ceiling is set at 10 percent. The increase cap increases to 30 percent for apartments valued between 600 million to 900 million won, and 50 percent for those that are valued higher.
“For homes that qualify for the comprehensive real estate tax, the cap is much steeper compared to others, [single-home]owners whose assessed value is higher than 900 million won or multi-homeowners will be hit with more tax,” said Won of KB Kookmin Bank.
And with the government set to revise real estate tax later this year, the burden on homeowners, especially those who own more than one apartment, is likely to get heavier.
“As the government is pushing for tax reform [centered on] real estate tax, the burden may get bigger for those who own expensive houses in the Gangnam region, as well as multiple homeowners,” said tax accountant Kim Jong-pil.
Officials, however, say that the gist of the reform is to ensure fair taxation and real estate market control.
“Real estate tax reform will comprehensively consider [factors such as] equity in burden of tax and stabilization of real estate prices,” said Kim Dong-yeon, the country’s finance minister. “The focus is on fair taxation and [the government] will not do it just to repress real estate speculation in certain areas.”
According to Kim, the ministry’s recommendation on real estate tax reform will be made by the end of June.
BY HWANG EUI-YOUNG, KIM TAE-YOON AND CHOI HYUNG-JO [email@example.com]