Real estate measures shock and awe market

The real estate market panicked after the government surprised it with cooling-off measures Monday.

One law office filed a petition to the Constitutional Court claiming the measures violated citizens’ basic right to wealth, while other critics accused the government of a kind of socialist control of the real estate market.

But the Ministry of Land, Infrastructure and Transport Tuesday confirmed its plans announced the day before, which included raising the assessed values of apartments, especially expensive apartments.

From next year, 70 percent of the market value will be used to arrive at the assessed value for apartments valued between 900 million ($767,000) and 1.5 billion won, compared to 68 percent now.

Tax bills will rise considerably on apartments that have risen in value.

Apartments with lower market values will have assessed values of around 68 percent.

One of the examples the government cited was an 84-square-meter (904-square-foot) apartment in Gangnam District, southern Seoul, whose market value at the end of 2018 was 1.76 billion won but rose to 2.35 billion won recently. That means the market value of the apartment rose 33.5 percent in just one year.

The assessed value of the apartment will rise 53 percent from 1.15 billion won to 1.76 billion won next year.

For that apartment, property taxes including the comprehensive real estate tax will rise 50 percent from 4.2 million won this year to nearly 6.3 million won next year.

On Monday, the government announced the comprehensive real estate tax would be increased 0.1 percentage points to a maximum 0.3 percentage points.

“The assessed value of apartments in Gangnam and Mapo could see a 20 to 30 percent increase [next year],” said a Land Ministry official.

In August or September, the ministry plans to release a road map of where it will start raising assessed values of both apartments and stand-alone houses to reflect 80 to 90 percent of their market value, which will likely be applied starting in 2021.

On Tuesday, Financial Services Commission Chairman Eun Sung-soo was the first non-Blue House top government official to announce plans to sell an apartment.

On Monday, the administration told top staff at the Blue House to sell apartments in the greater Seoul area if they owned more than one.

During a confirmation hearing, Eun disclosed that he owns an 84-square-meter apartment in Jamwon-dong, Gangnam, and a similar-sized apartment in Sejong. Both areas are designated as overheated real estate areas by the government, where the heaviest loan restrictions and other regulations are imposed.

“I called up the tenant around 5 p.m. personally,” Eun said of his plan to sell the apartment.

“[Monday’s measures] clearly reaffirmed the government’s intent to stabilize the housing market not only by the intensity of the regulations but also the wide range,” said Song Yu-rim, Hanwha Investment & Securities’ analyst.

“Even for a short period, people who own multiple apartments will start putting up apartments for sale.”

But Anguk Law Offices on Tuesday filed a petition with the Constitutional Court arguing the government’s measures were against the basic rights people have to borrow from financial institutions.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]