Raising property tax ratio to 80% would add W3m per taxpayer, analysis shows

Raising the fair market value ratio for the comprehensive real estate tax from the current 60% to 80% would push total housing property tax above 10 trillion won ($6.55 billion) this year, according to a new analysis. With an upward adjustment of the ratio widely expected to feature in a tax reform package due at the end of this month, the change could bring not only multi-home owners but also owner-occupiers with a single residence within the scope of the tax.

People Power Party lawmaker Lee Jong-wook of the National Assembly's Land, Infrastructure and Transport Committee released the analysis Thursday, drawing on data commissioned from the National Assembly Budget Office. It estimates that housing property tax this year would reach 8.7 trillion won under the current 60% ratio.

The fair market value ratio is the percentage applied to the officially assessed price of a property to calculate the taxable base for the comprehensive real estate tax. Because it can be adjusted by amending the enforcement decree of the comprehensive real estate tax act — without requiring separate legislation — it is considered a relatively low-political-cost tool for the government. The ratio climbed as high as 95% under the Moon Jae-in administration before falling to 60% after President Yoon Suk Yeol took office, where it has remained since.

Raising the ratio to 80% would increase housing property tax to 10.07 trillion won, a 15.7% rise — or 1.37 trillion won — from the current level, the analysis found. Applying a 95% ratio would push the figure to 10.77 trillion won, a 23.8% increase of 2.07 trillion won.

The average sale price of a Seoul apartment stood at 1.35 billion won in May, meaning even a modest ratio adjustment is expected to bring a significant number of Seoul apartments into the comprehensive real estate tax net. Some observers say the pace of any increase should be managed carefully rather than raised sharply all at once.

The Budget Office projected housing property tax this year at 7.22 trillion won. The comprehensive real estate tax portion alone is estimated to rise from 1.48 trillion won at the current 60% ratio to 2.84 trillion won at 80% and 3.55 trillion won at 95%.

By region, Seoul and Gyeonggi Province — where high-priced apartments are concentrated — face the steepest increases. Seoul's housing property tax would climb from the current 4.52 trillion won to 5.47 trillion won, a 21.1% rise, if the ratio moves to 80%, and to 5.96 trillion won, up 31.9%, at 95%. Gyeonggi Province would see its bill rise from 2.04 trillion won to 2.26 trillion won at 80% and 2.37 trillion won at 95%, increases of 10.8% and 16.3% respectively.

The per-taxpayer burden is also set to grow substantially.

Based on the 455,331 people subject to the comprehensive real estate tax in 2024, the average housing portion of the tax per person would nearly double — from 3.24 million won to 6.24 million won — if the ratio rises to 80%, and reach 7.8 million won, 2.4 times the current level, at 95%.

"Raising property taxes increases the burden on single-home owners, retirees and genuine end-users, and there is a risk that landlords will pass the higher tax costs on to tenants through higher jeonse and monthly rent prices," Lee said. "The government must put in place supply measures and practical market stabilization policies that ease the housing cost burden on the public."