Gov't tries reducing taxes for single homeowners

Economy

Published: 23 Mar. 2022, 17:37 Updated: 23 Mar. 2022, 19:28

Gov't tries reducing taxes for single homeowners

View of apartments in Seoul from Lotte Tower in Jamsil, Seoul on Wednesdaay. This year's government assessed value rose more than 17 percent, a third highest year-on-year increase and a double-digit growth for the second consecutive years. An increase in the assessed value means higher taxes. [YONHAP]

The outgoing government promised to keep taxes low this year for single homeowners.

The assessed value used to calculate property taxes will be last year's, not this year's, according to the Ministry of Land, Infrastructure and Transport.

The assessed value of apartments nationwide grew more than 17 percent this year.

“We will be temporarily keeping the overall burden of property taxes at similar levels as last year's,” said Finance Minister Hong Nam-ki on Wednesday during a government meeting on real estate measures.

According to the Ministry of Land, Infrastructure and Transport, the government will apply the assessed value of properties from 2021 instead of 2022 when calculating taxes for single homeowners.

For people who own more than one residential property, this year’s assessed values will be used.

The average assessed value of apartments this year was 17.2 percent higher than last year. While that was slower than the 19.05 percent increase in 2021, it was the third highest ever. The biggest increase was 22.7 percent in 2007. The second highest was in 2021 at 19.05 percent.

The assessed value of a property is used to calculate real estate taxes, including the comprehensive real estate holding tax applied to pricy apartments, and is also used to partly determine health insurance premiums.

The outgoing government said that thanks to special measures implemented last year, single homeowners' taxes will be lower than in 2020.

Single homeowners with a property assessed at 900 million won or less are eligible for a 0.05 percentage point cut on property taxes levied by local governments.

The comprehensive real estate holding tax will remain the same as last year.

Due to increases in assessed values, the government estimates 69,000 more people will be liable to pay the comprehensive real estate holding tax.

By freezing the assessed value, they won't have to pay it.

If this year's assessed value was applied, 145,000 owners of single residences would have had to pay a total of 416.2 billion won ($342.2 million) in comprehensive real estate holding tax. But as last year's assessed value is being applied, they will have to pay 174.5 billion won less.

According to the Land Ministry, a person who owns a single apartment with an assessed value that went up from 1.1 billion won in 2021 to 1.3 billion won this year would have had to pay 4.25 million won in property tax to the local government, a 31 percent increase.

But because last year’s assessed value will be applied, that person will only pay 3.25 million won.

The government is also offering incentives to owners of several residential properties to get tax breaks.

If a person with more than two apartments sells all but one, the assessed value that will be applied on that property will be the same as in 2021.

The government will suspend comprehensive real estate holding taxes for single homeowners aged 60 or more with annual taxable incomes of 70 million won or less, and whose comprehensive real estate holding tax is 1 million won or more.

The suspension will be lifted if the homeowner sells or bequeaths the apartment.

Finance Minister Hong Nam-ki announces the government plans to ease tax burden of single homeowners for this year during a government meeting on real estate policies held Wednesday in Seoul. [YONHAP]

Many expect major change in real estate policies once the Yoon Suk-yeol administration takes office in May.

The president-elect promised to lower real estate taxes during the campaign.

Yoon strongly criticized the Moon government’s mishandling of the real estate market.

Rising prices of apartments is one reason for bigger tax bills, but also a change in the way the government assesses real estate values.

Since it took office, the Moon Jae-in administration has been raising the ratio of the assessed value of real estate to its actual market value. When it took office, that ratio was 65.6 percent.

In 2020, it was 69 percent. This year, it was raised to 71.5 percent and the long-term plan was to raise the ratio to 90 percent.

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