Appraisal value of homes falls 18.6%, steepest decline on record

Finance Minister Choo Kyung-ho speaks at a ministerial meeting held at the government complex in central Seoul on Wednesday. [YONHAP]

The appraisal value of homes fell almost 20 percent this year, the steepest decline on record.

The value fell by 18.61 percent as of the first day of this year compared to a year earlier. It was the first decline in a decade since a 4.1 percent deceleration in 2013, and was the steepest fall since the system was introduced in 2005.

The reduced appraisal value will ease the tax burden of home owners as well as health insurance fees, which are calculated based on appraisal values.

“The appraisal value imposes a far-reaching impact on people’s daily lives as it is used as the basic material for calculating all sorts of taxes and the welfare system,” said Finance Minister Choo Kyung-ho in a meeting with chiefs of the Financial Services Commission and the land ministry at the government complex in central Seoul on Wednesday.

“It played a key role in increasing people’s pressure as the value jumped 63.4 percent over the past five years due to the surge in housing prices and the assessment price.”

The assessment rate fell to 69 percent from 71.5 percent last year.

The reduced assessment rate and the plunge in property prices as a result of the rapid rise of the interest rate were cited as the reasons for the double-digit deceleration of the appraisal value.

The Bank of Korea’s policy rate jumped to 3.50 percent in January from 0.50 percent in July 2021.

Due to the new appraisal value, property tax and the comprehensive real estate holding tax will return to the levels seen in 2020, while health insurance fees will decrease by 3.9 percent, or 3,839 won ($3), monthly, according to the finance ministry. People who were shut out from the welfare system due to the sudden rise of their property's value will also be able to apply for benefits, the ministry added.

Falling real estate prices have somewhat tapered off. Different regions are showing different price decreases depending on the housing supply in the individual cities and favorable factors, like development plans, said Finance Minister Choo.

The average apartment price in the second week of this month was down 0.26 percent from a week earlier. The fall rate was down from 0.49 percent decrease seen in the first week of February, and a 0.59 percent decline in the first week of last December.

“The government will induce a soft landing of the real estate market while closely watching the complex market conditions as it is difficult to predict its future direction due to internal and external uncertainties,” Choo added.

The number of unsold houses reached around 75,000 units as of the end of January, the largest in more than a decade. Minister of Land, Infrastructure and Transport Won Hee-ryong said on Tuesday that he expects the figure to reach around 100 thousand.

The appraisal value fell the largest in Sejong (-30.68 percent), followed by Incheon (-24.04 percent), Daegu (-22.06 percent) and Daejeon (-21.54 percent). The value in Seoul decelerated 17.30 percent and Gyeonggi 22.25 percent.

The average price of a unit nationwide is 245.03 million won and the median price is 169 million won.

BY JIN MIN-JI [jin.minji@joongang.co.kr]