Tax hikes after real estate debacle

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Tax hikes after real estate debacle

Published: 16 Mar. 2021, 19:39 Updated: 17 Mar. 2021, 13:42

Property-related taxes are expected to further aggravate homeowners anguished by multiple woes due to real estate policy failures under the Moon Jae-in government. The appraisal value of multi-residential homes soared 19.08 percent this year, the highest since 22.7 percent in 2007 toward the end of former liberal president Roh Moo-hyun.

The gain in Seoul averaged at 19.91 percent. The appreciation was 34.66 percent in Nowon District in northeastern Seoul, sharply higher than 13.96 percent in Gangnam District, southern Seoul where apartments are pricier. The jump owes to not just the raise in the appraisal value to 70.2 percent of market value from 69 percent average last year, but more to the surge in actual trade value amid a spike in property prices.

The appraisal value went up as high as 70.68 percent in Sejong City. The “unusual” movement as described by the land ministry results from the talk by the ruling party of moving the National Assembly to the administrative city.

The reckless policy actions to contain housing prices have only hardened public lives. Appraisal value becomes the basis for various taxes, including property ownership tax. When they rise, property and comprehensive real estate taxes also increase, as well as premiums on medical insurance. Under the latest rates in Seoul, one out of every five households in the capital will face a substantially fatter tax bill as their home appraisal value exceeds 900 million won ($795,000). Many small apartments in northern Seoul will also face more tax. Taxes aimed to levy riches in Gangnam have extended to the middle class.

Higher appraisal value also translates into bigger medical insurance bills for 1.27million out of the 8.2 million self-subscribed insurers. According to a National Health Insurance Service report in 2019, when appraisal value jumps 30 percent, the rates on non-corporate-sponsored insurers go up 13.4 percent on average. The hike would be higher for retirees whose reported wealth is only a single house. The government promises to deduct property share in calculating individual rates, but it nevertheless cannot escape public scorn for raising the tax burden after worsening housing prices.

The government must re-examine real estate statistics as well as overall real estate policy. According to the Korea Appraisal Board, apartment prices rose 3.01 percent in Seoul and 5.15 percent in Nowon district on average last year. The government claims housing prices have been stabilized by citing the board rates. But appraisal value follows market value. This cannot make sense.