The number of households that experienced maximum property tax increase has increased 21 times in Seoul under the current administration. For houses that cost 600 million won or more, property tax can increase up to 30 percent per year. The number of households with maximum increase rose from about 40,000 in 2017 to 870,000 this year. It is attributed to a surge in posted prices, which are the reference points for taxation. As the government plans to increase posted prices close to market prices, people’s tax burden will become heavier.
The households with maximum property tax increase particularly increased in areas with low- to mid-priced houses, such as Nowon and Geumcheon. Only 2,000 houses experienced such an increase four years ago in Nowon, but the figure rose to 16,354 this year. In Seongdong, more than half of all houses experienced property tax increase to the legal limit. Such developments are attributed to the ‘balloon effect’ where pressure on housing prices in Gangnam led to higher prices in Gangbuk. Regulatory policies put forward to crack down on speculation brought more taxes to those who own houses for residency.
Once-increased posted prices also affect next year’s property tax. Even when prices don’t change in the following year, the amount beyond the 30 percent limit in the previous year is included in property tax. The government raised posted prices by most this year since the introduction of the posted price system. It plans to raise the ratio of posted prices to market prices from the current level of 70 percent to 90 percent by 2030, which may lead to a number of houses whose property tax will increase to the upper limit of 30 percent every year.
The government increased the tax burden instead of expanding supply by blaming speculation for a rapid rise in housing prices. As people who own multiple homes have turned to inheritance, rather than selling their houses, the issue of shortage has gotten worse. The vicious cycle of policies driving up prices and tax burden increase has been repeated. The ownership of houses means rising tax and selling them means a large amount of property holding tax. Those who have a single house for residency are suffering.
The rising burden of property tax is not limited to certain regions. If housing prices are not put under control and posted prices become close to market prices, most of the middle class with a single house may have to pay maximum property tax. As the housing supply cannot be expanded right away, the speed at which posted prices rise should be controlled. This is the least that the government, which failed to control housing prices during its term, can do.