Property Tax to Quadruple on over-600 Million-Won Apartments

The Ministry of Government Administration and Home Affairs (MOGAHA) is pursuing a measure to quadruple the property tax on luxury apartments from 2005. This is a tougher plan than originally set out, in which the Ministry intended to raise the property tax by 60 to 70 percent raise on September 1.

“In readjusting property tax rates for 2005, we are reviewing a drastic increase for tax rates on high-priced apartments,” said a MOGAHA official, adding, “If property tax rates double next year due to the tax reform, another readjustment in 2005 will lead to a second jump in tax rates of more than two-fold.”

Upward readjustment of tax rates focuses on apartments which are not necessarily large in size, but whose prices have shot up too much, for example, with expectations for reconstruction.

According to Realty 114, a realty market watcher, as of August 28, the number of apartments priced at over 600 million won reached 86,800 in the southern area of Seoul, including Gangnam-gu, Seocho-gu, and Songpa-gu.

An official at the MOGAHA said, “In the first stage of the property tax reform next year, we will change the basis for applying a tax rate increase or decrease from the size of an apartment to the official market price of an apartment. As such, property taxes on apartments in Gangnam will go up over 2.5 times.”

Indeed, the Dong-A Ilbo has discovered through a joint study with the MOGAHA, along with the Gangnam-gu Office and tax accountants, that property taxes on a 31-pyong apartment in Daechi-dong, Gangnam, currently estimated at 65,900 won, will grow to 210,900 won next year.

The increase in property taxes will come about because the basis for taxation will shift to official market prices, and thus, the tax base will go up along with the tax rates.

The tax rate readjustment, if everything goes according to the MOGAHA plan, will increase property taxes to exceed 420,000 won in 2005.

“The announcement of the property tax growth rates by 60 to 70 percent in the government tax reform plan is applicable to 31-pyong apartments with a market price of around 400 million won”, said the MOGAHA, going on to add, “Real property tax will go up further given that a 30-pyong apartment in Gangnam costs over 600 million won.”

Ki-Jeong Ko koh@donga.com