Official Land Prices Increase by an Average of 18.9 Percent

The total value of land prices in Korea surpasses 2,000 trillion won.

According to the Ministry of Construction and Transportation, the total value of the official land price in Korea was 2,041 trillion 721.5 billion won, which is 325 trillion 61.3 billion won more than last years 1,716 trillion 660.2 billion won.

This amount is over four times the entire stock prices of the companies listed on the Korean stock exchange and KOSDAQ, which are about 491 trillion 488 billion won based on May 30’s quotes.

The most expensive piece of land in Korea, the same as last year, is the Myeongdong Building (containing the coffee shop Pascucci), Jung-gu, Seoul. Myeongdong2-ga’s Woori Bank branch, which ranked first until 2003, fell to sixth place, costing 132.23 million won per pyeong.

The cheapest land, on the other hand, was a hill in Yangnam-myeon, Gyeongju City, Gyeongbuk that cost 162 won per pyeong.

Out of residential land, Dongbu Centreville at Daechi-dong, Gangnam-gu, Seoul, took first place, as it did the year before, with a value of 17.85 million 1,320 won per pyeong.

Land prices in regional cities increased more than in large cities.

Out of the 27.91 million pilji (registration unit) of land that is subject to pricing, 88.67 percent had their prices raised. Only 1.27 million pilji, or 4.56 percent, had their prices decreased, and 1.89 million pilji, or 6.77 percent, had the same price as last year.

The meaning of the fact that nine out of 10 locations had their official prices raised, means that more land is subject to taxes and real estate development funds.

The land in metropolises such as Seoul, Busan, Daegu, Incheon, Gwangju, Daejeon and Ulsan that had price increases were 2,637,554 pilji out of 3,476,596 pilji, or 75.87 percent, which is significantly lower than the national average of 88.67 percent. In contrast, other parts of the country had their over 90 percent of their land increase in value.

The increase rate in prices was higher in regional cities than in big cities. The rate of increase in Seoul and other metropolises was between six to 15 percent, which is lower than the national average of 18.94 percent.

The planned administrative city, Chungnam, had its land prices jump by 35.72 percent, while other provinces such as Gyeonggi, Gyeongnam, and Gangwon had their land prices rise by 35.37 percent, 23.08 percent, and 19.06 percent, respectively.

Tax Burdens to Increase-

In particular, property taxes are likely to increase greatly.

The property tax for a 146-pyeong land plot in Yong-in City, Gyeonggi, last year was 890,000 won, but it is estimated that this year, it will increase up to 1.34 million won. If the escalation in official land prices is totally reflected in taxes, it will amount to 2.21 million won, but the annual property tax increase rate is limited up to 50 percent of the year before, so that is why the rate is estimated to be 1.34 million won.

It is also predicted that taxes for 4,575 pyeong of forest land in Yangjae-dong, Seocho-gu, Seoul, which was valued at 2,495,967 won last year, will increase to an upper limit of 3,473,950 won.

The reason why property taxes are reaching their increase limit is because the individual official land price confirmation date has been advanced to May 31, in contrast to the annual date of June 30. The property tax is levied annually on June 1, so this year, two years worth of official land price increases will be reflected in taxes.

In other words, adding up last year’s and this year’s land price hikes of 18.58 and 18.94 percent, this year’s property taxation standard will be levied with the land price increase of over 37 percent.

Government Likely to Lower Taxation Standard-

The Ministry of Finance and Economy estimates that if the official land prices announced are reflected in taxation, the amount of property taxes collected will surpass last year’s amount by 15 to 18 percent.

If this is the case, tax resistance is very likely to occur.

Accordingly, the government and ruling party held a meeting on May 27 and agreed to “adjust taxation standards according to local governments, and so only an additional 10 percent of tax revenue would be increased.”

Hence, the taxes that taxpayers should actually pay will probably be significantly lower than the taxation standards set in accordance with the newly announced official land prices.

Jae-Seong Hwang Byong-Ki Lee jsonhng@donga.com eye@donga.com