S. Korean government raises housing prices and imposes huge taxes

The Ministry of Land, Infrastructure and Transport announced on Monday the declared prices of multi-family housing, such as apartments, tenement houses, and multi-household houses, at 19 percent higher than last year. It is the result of the sudden rise of housing prices across the country last year, which recorded the biggest price jump for the first time in 14 years. As gross real estate tax rates increased along with the rise in declared values, the owners of multi-family housing whose declared values are over 600 million won – about 900 million won in market values – will face significantly increased taxes.

Declared housing values in Sejong rose 71 percent as a result of some members of the ruling party insisting on moving the administrative capital to the city. Along with Gyeonggi Province, which experienced a 24 percent rise, Seoul, Daejeon, and Busan’s declared housing prices went up around 20 percent. As housing prices in major cities across the country skyrocketed due to the government’s various regulations, declared housing prices, which are the basis to calculate property tax, gross real estate tax, and the insurance contributions of the self-employed insured, surged.

While announcing the newly raised declared values, the government emphasized that multi-family housing whose declared values are over 900 million won – therefore subject to gross real estate tax – only accounts for 3.7 percent nationwide and 16.0 percent in Seoul and that property tax rates imposed on those who have a single house worth 600 million won or less decreased. It is just another repetition of the current government’s practice to raise taxes and create division.

However, with the recent rise, one out of four apartments in Seoul – 413,000 out of 1.68 million apartments – have the declared values of 900 million won or more and became subject to gross real estate tax. The original intention of the tax to punitively impose a tax on minimum high-priced multi-house owners has been completely lost. The property tax to be imposed on those who have a house worth 600 million won or higher in declared values will increase up to 30 percent. About 20,000 people who used to be considered as the dependents of their children for the national health insurance now lost that status and have to pay 119,000 won per month.

The failure of the government’s real estate policies, which drove up apartment prices in Seoul by 78 percent during the last four years, has become a massive tax burden for homeowners. Despite the criticism for the violation of the principle of no taxation without law, the government arbitrarily raised declared values, adding more burden. Gross real estate tax revenues, which tripled from 1.65 trillion won in 2017 to 5.11 trillion won in 2021, are used for the government’s “tax give-away.”

A sharp increase in property tax is beyond the level that retirees with a single home and no income can bear. While both the ruling and opposition party members proposed a bill to decrease gross real estate tax for single homeowners last month, it wasn’t even deliberated due to the government’s opposition. Real estate tax policies that are failing to control real estate prices while punishing the public should be amended as soon as possible.