Homeowners Object to Government Appraisals

It was reported that one out of 10 owners of detached, multi-family, or small and medium-sized row houses (under 50 pyong in effective area) in Seoul raised an objection to government-appraised house prices.

Accordingly, objections to house prices of 13 million households, which the government is publishing on April 30, are expected to follow one after another.

If things go wrong, tax resistance would be caused as the house prices are to be used as standards for real estate taxation of all sorts, including the property tax, comprehensive real estate tax, and capital gains tax.

According to the Seoul Metropolitan Government, on April 24, as a result of citizens’ checking efforts on 470,000 households of detached, multi-family or small and medium-sized houses in 25 districts (Gu) from April 1 to April 20, 45,564 people checked their house prices and 5,231 people—11.5 percent of all the 45,564 people—demanded re-adjustment of their house prices.

Most of those who demanded the re-adjustment, or 4,823 (92.2 percent) people, asked the government to lower their house prices. The number of those who demanded a raise in their house prices was 386 (7.4 percent), and that of others was 22 (0.4 percent).

By districts (Gu), 2,048 people of 10,899 households who will have their house prices officially announced, checked the house prices in Gangnam-gu, and more than half of those people, 1,124 people (54.9 percent), requested the prices to be re-adjusted.

In Seocho-gu, 2,196 out of the target 9,986 households checked their house prices, and 1,242 households (56.6 percent) of these objected to the house prices.

In addition, 465 people checked their house prices, and 155 people (33.3 percent) expressed their disapproval of the house prices in Nowon-gu; 140 (27.5 percent) out of 510 people in Mapo-gu, 292 (21.5 percent) out of 1,355 people in Dobong-gu, and 251 (12.7 percent) out of 1,976 people in Yongsan-gu also made complaints against the house prices.

Regarding the low rate (below 10 percent) of official house price reading, an official of the Seoul Metropolitan Government said, “This occurred because of insufficient advertisement,” adding, “We are planning to actively publicize that re-adjustment requests will be available for a one-month period by the end of May after a final declaration on April 30.”

An official in a gu-office spoke about the fact that objections were more than expected, saying, “While the existing taxation standard of detached houses was made on the level of 30 to 40 percent of market prices, the house prices officially announced this time were adjusted to the level of 80 percent of market prices,” and that “this change of price appraisal brought out lots of objections among taxpayers, who were worried about higher tax burdens.”

Meanwhile, it was also pointed out that the price appraisal did not reflect the government’s intention that the house prices should be 80 percent of market prices.

“The standard house prices are merely on the level of 60 to 70 percent of market prices, and are, at most, 50 percent in some areas,” adding, “Therefore, house prices appraised on the basis of standard house prices cannot reflect market prices,” said an official in another gu-office in Seoul.

One way or another, it is highly possible that much disapproval will be caused when the official house prices are announced at the end of this month, and comparisons with one another become available.

The official house prices are to be the taxation standard of the acquisition tax and registration tax immediately from the end of April, and the standard used for calculating capital gains, inheritance, and gift taxes starting July.

Jae-Seong Hwang Jin-Han Lee jsonhng@donga.com likeday@donga.com