Land Minister warns of tax hike

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Land Minister warns of tax hike

The burden of owning an apartment in an affluent neighborhood of Seoul is likely to go up significantly, as Land Minister Kim Hyun-mee recently warned that he would increase property taxes in order to curb rising home values in the capital.

Kim on Tuesday said the government will reflect increased real estate values in next year’s tax plan.

“I understand that there have been comments that the government-assessed value failed to catch up to regions where housing prices have been going up,” Kim said in a meeting with lawmakers. “Starting in October, when [the government] starts its real estate value assessments, we plan on reflecting this year’s increase.”

The government-assessed value is used to calculate property taxes levied by the local government and the comprehensive real estate tax on owners of multiple homes and on apartments whose values exceed 900 million won.

The government already announced tougher regulations last month targeted at what it considers to be an overheated real estate market, particularly in Seoul.

In its last move, the government, starting next year, decided to tax 80 percent of a property’s assessed value and eventually raise it to 100 percent.

However, this move did not have a major impact on those who own a single apartment, as the comprehensive real estate tax mostly covers owners of multiple homes. But if the assessed value itself is raised, it will increase the tax burden on everyone who lives in a neighborhood that has seen a sharp increase in their property value.

Currently, the government assessed value is estimated to be between 50 and 70 percent of the market value.

As of 2016, there were 13 million people in Korea who owned one apartment. The Land Ministry this year already raised its appraisal value by an average of 10.2 percent compared to the previous year.

As a result, the property tax levied by the local government has gone up. A 76-square-meter (818-square-foot) apartment in the Jamsil 5 Danji complex in southern Seoul saw its’ government assessed value increase 25 percent from 920 million won to 1.15 billion won. As a result, apartment owners saw their property tax jump by 47 percent from 2.70 million won last year to 3.97 million won.

“This is the only apartment that I have, and I’m not owning it as an investment but because I would like to live in it,” said a 40 year-old resident and owner of an apartment in Jamsil. “This year, the tax burden is tough, and if the government raises the taxes further, it would be really difficult for us to continue to own the only apartment that we have.”

A recent announcement from the Seoul Metropolitan Government on major development projects in Yeouido, western Seoul, and Yongsan, central Seoul, are driving up real estate prices in those neighborhoods.

Seoul Mayor Park Won-soon, during his visit to Singapore in early July, announced a blueprint for a plan for redeveloping Yeouido, including raising the height of buildings to allow more room for parks and community spaces. He also said the city plans to turn Yongsan into a major conference and exhibition center.

According to the Korea Appraisal Board, housing prices in Seoul rose 3.47 percent last month on average, the sharpest increase nationwide.

“After the Seoul government’s announcement, small apartment prices around Yongsan went up by 50 million won while for mid and large-size apartments they went up by more than 100 million won,” said a realtor in Yongsan.

Market experts say that after the government announced the comprehensive real estate reform plan, uncertainty was lifted. The regulation didn’t come down heavily on owners of single high-value apartments, so people searching for a single expensive apartment started to increase.

Apartments in popular neighborhoods like Gangnam in southern Seoul have become popular among buyers, driving up prices.

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