Property tax on Banpo 84㎡ unit could hit W60m next year as 'triple tax hike' looms

As the government moves to raise taxes on ultra-high-priced homes, some expensive apartments in Gangnam-gu and Yongsan-gu have already hit record-high property tax burdens this year without any rate increases. If the government proceeds with adjustments to the comprehensive real estate tax rate, the fair market value ratio and the publicly assessed price realization rate, the tax burden on owners of high-priced homes is expected to surge by more than two to three times.

According to a simulation by Woo Byung-tak, a senior consultant at Shinhan Premier Pathfinder, property tax bills for nine unit types in complexes with publicly assessed prices exceeding 3 billion won ($2.05 million) across the three Gangnam districts and Yongsan-gu showed that five of the nine unit types had already reached all-time highs this year — with no separate rate increases applied.

Property tax based on publicly assessed prices set at the start of the year began to be levied this month, calculated as of June 1, with the comprehensive real estate tax due in December.

For example, the estimated property tax this year for a single-home owner of an 84-square-meter unit (exclusive use area) at Banpo Zi in Banpo-dong, Seocho-gu is 18.1 million won — excluding deductions for elderly owners and long-term holders under the comprehensive real estate tax. That is an increase of more than 40 percent from 12.74 million won last year, surpassing the previous all-time high of 16.53 million won set in 2021.

In 2021, under the Moon Jae-in administration, the publicly assessed price realization rate for apartments priced above 1.5 billion won stood at 78.3 percent, and the fair market value ratio was set at 95 percent for the comprehensive real estate tax and 60 percent for property tax — making it the heaviest property tax burden on record. This year, the realization rate stands at only 69 percent and the fair market value ratio has been lowered to 60 percent for the comprehensive real estate tax and 43 to 45 percent for property tax, yet the calculation still produced an all-time high tax bill.

Rising apartment values drove publicly assessed prices higher. The publicly assessed price for this unit stands at 3.49 billion won this year, up 55.5 percent from 2.25 billion won in 2021.

Other units also hit record highs. At Acro River Park in Banpo-dong, Seocho-gu, the property tax came to 22.27 million won for the 84.97-square-meter unit and 38.16 million won for the 112.96-square-meter unit. Raemian Firstiage in Banpo-dong at 84.93 square meters recorded 19.05 million won, Jamsil Jugong 5 Complex in Songpa-gu at 82.6 square meters came to 12.58 million won, and Hannam The Hill in Yongsan-gu at 235.3 square meters reached 76.33 million won — all at record levels.

"Seoul apartment prices rose sharply last year, and many properties not only in the three Gangnam districts and Yongsan but also in major Han River belt areas such as Mapo, Seongdong and Gwangjin have hit the property tax ceiling," Woo said. "If the comprehensive real estate tax rate, the fair market value ratio and the publicly assessed price realization rate are all adjusted at the same time, the property tax burden will rise even more steeply."

The government is expected to announce a tax reform package targeting ultra-high-priced homes, aiming to bring the tax burden in line with levels seen in advanced economies. At a major real estate forum chaired by President Lee Jae Myung on Thursday, calls were raised to lift the effective property tax rate on ultra-high-priced homes to 1 percent, the level common in advanced economies.

The market widely expects the threshold to be set at a publicly assessed price of 3 billion won, which, accounting for the average apartment realization rate of 69 percent, would capture apartments with a market price of around 4.3 billion won or more.

The main options being discussed for raising property taxes include creating a separate tax bracket for the comprehensive real estate tax, applying the fair market value ratio on a differentiated basis, adjusting the basic deduction, raising the publicly assessed price realization rate, and lifting the cap on annual comprehensive real estate tax increases. Of these, the fair market value ratio is the politically least burdensome option because it can be adjusted through a presidential decree without amending tax law.

Also under serious consideration is raising the annual cap on comprehensive real estate tax increases from the current 150 percent to as high as 300 percent, which would maximize the effect of any tax reform. The Roh Moo-hyun administration raised the cap from 150 percent to 300 percent; the Lee Myung-bak administration then cut it back to 150 percent. The Moon Jae-in administration later reinstated the 300 percent cap, but only for owners of two or more homes in regulated areas and those holding three or more properties, before the Yoon Suk Yeol administration reduced it back to 150 percent.