One out of five homeowners in Seoul will be paying comprehensive real estate holding tax this year. The national number of taxpayers owning one property has risen to 0.23 million, the highest ever. Those who are required to pay the tax for the first time are complaining as property prices dropped by tens of millions of won compared to the start of the year, but land value by public announcement increased.
According to the Ministry of Finance, those owning one property and paying comprehensive real estate holding tax increased 50% from the previous year, and the total tax value reached 250 billion won, a 6.7% increase year on year. The number of taxpayers paying comprehensive real estate holding tax, including those owning multiple homes, is 1.22 million, 8.1% of total homeowners across the nation, and 22.4% of homeowners in Seoul. This means 1 out of 12 homeowners in the country and one out of five homeowners in Seoul pay the tax.
With the growing number of taxpayers of comprehensive real estate holding tax, the tax is no longer viewed as wealth tax levied on a limited few owning multiple properties. Six out of ten single homeowners that paid comprehensive real estate holding tax two years earlier were office workers. Those among the self-employed had an annual income of less than 50 million won, which is 40% of the lower-income bracket. Also, 4 out of 10 persons were seniors aged 60 or older and were required to pay taxes even though they had no income source. It can be said that a comprehensive real estate holding tax is no longer a wealth tax.
This is the result of the government increasing the fair market value ratio, which is used to calculate published prices, comprehensive real estate holding tax rate, and comprehensive real estate holding tax since 2018, when housing prices began to increase. Instead of stabilizing house prices, increasing the fair market value ratio created greater tax burdens for people. It is not appropriate in current market conditions when housing prices are declining abruptly, creating worries of an economic hard landing. Some taxpayers feel it is unfair to pay the tax based on the housing price as of Jan 1, when apartment prices have fallen for 25 consecutive weeks in Seoul.
With published prices increasing 19.1% last year and 17.2% this year, those who own houses exceeding 1.1 billion, the minimum threshold for comprehensive real estate holding tax, are perplexed by increased tax burdens which have grown multifold. Many homeowners in the Gangbuk area used to be less than 200,000 won, but the amount has increased by 400,000 to 800,000 won. The government’s amended tax plan, which levies property tax and comprehensive real estate holding tax based on house prices published last year, and applies a threshold of 1.4 billion won, is pending due to opposition from the opposition party. The government and both parties should revamp the real estate tax system that is currently focused on controlling house prices to reflect the deceleration of home prices.