600M Price Standard Irks Homeowners

Ahn, 52, has lived in a 31-pyeong apartment in Gangnam-gu, Seoul, for twelve years. The official price of his apartment is 646 million won, and the market price is a little over 800 million won.

Although he owns an apartment, he has to pay a transfer income tax when he sells it. He cannot apply for a reverse mortgage loan even though he wants to when he gets older, because the official price is over 600 million won.

The property tax on Ahn’s apartment will be 50 percent up this year, while the property tax for less than 600 million won apartments regardless of size will be only 10 percent up at maximum (5 percent up for less than 300 million won apartments). From the end of this month, those who want to buy Ahn’s apartment should submit a payment plan to the district office.

“600 million won” has become a standard housing price for which one receives all kinds of disadvantages in Korean society.

The Roh administration made “600 million won” a standard for regulations and taxes on housing made to control real estate speculation.

Increasing Regulations on Over 600 Million Won Priced Houses –

600 million won as a standard in the housing-related law first appeared in September of 1999.

The government at that time defined “high-class” houses to which a transfer income tax applied as those “whose size is more than 50 pyeong-sized and whose market price is over 600 million won.” In January of 2003, the size limit was pulled off, and the term also changed from “high-class” to “high-priced.”

Last year, the “600 million won” standard was highlighted again through the “August 31 Real Estate Comprehensive Plan.”

The government lowered the standard for general real estate taxes from “over 900 million won” to “over 600 million won” in official price from this January.

In this year’s “March 30 Real Estate Measures,” the government applied Debt To Income (DTI) to those who buy over 600 million won priced houses in housing speculation areas, thus lowering the available amount of loan.

The government also made it obligatory to submit “a payment plan” to the district office when one purchases an over 600 million won priced house from the end of this month. Local self-governing bodies or the Ministry of Construction & Transportation can turn in this data to the National Tax Service. In other words, those who purchase over 600 million won priced houses may well be ready for a tax investigation.

Ajou University Economics professor Hyeon Jin-gwon said, “Government officials are using the “600 million won standard” indiscriminately as a means to control housing price in Gangnam. The current administration seems to have some kind of ‘feelings’ toward rich people.”

Negative Side Effects of Excessive Regulations –

Economy experts warn against applying regulations according to the 600 million won standard.

The biggest problem is that those regulations will apply to those who currently own less than 600 million won priced houses as housing price rises up in general.

According to this year’s official price list announced by the Ministry, the total number of over 600 million won priced houses is 159,115.

The official price for 94,856 housing complexes priced between 500 and 600 million won will increase this year, and the number of houses for comprehensive real estate taxes next year will be 260,000.

Accordingly, the percentage of houses for comprehensive real estate taxes is expected to go up from 1.2 percent of the total number of houses nationwide (13.01 million) this year to 2.0 percent next year.

Sogang University Economics professor Kim Gyeong-hwan said, “There were few houses to apply the 600 million won standard in 1999, but nowadays an increasing number of houses will come under the regulations.”

Experts are also concerned about the “discriminatory” nature of the 600 million won standard.

Dankook University Economics professor Kim Sang-gyeom said, “If this standard is expanded further, it will be criticized as a serious transgression of the property right.”