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Government moves to abolish current official real estate valuation system

Government moves to abolish current official real estate valuation system

Posted March. 20, 2024 07:58,   

Updated March. 20, 2024 07:58

한국어

The Korean government announced its decision to scrap the entire roadmap to align officially posted real estate prices with market values, a plan initiated by the previous Moon Jae-in administration. At Tuesday's 21st open discussion on livelihood-related policies, the government heavily criticized the plan, labeling it as "punitive taxation" and an "unreasonable policy." Despite purported efforts to alleviate the tax burden on skyrocketing real estate, critics argue that the premature announcement to abolish the plan without presenting a concrete alternative is merely a populist tax policy maneuver ahead of the upcoming general elections.

The plan, initiated in 2020 by the previous administration, aimed to gradually align official real estate prices with market levels, targeting 90% alignment by 2035. Criticism arose regarding the policy's substantial increase in property holding tax, burdening households as housing prices surged. The annual increase of 3% in official real estate prices skyrocketed to an average of 18% yearly since the plan's adoption. Subsequently, as property prices began to decline, the official posted prices abnormally exceeded market values in some cases.

Since taking office, the current administration pledged to revise the plan and mitigate its adverse effects but procrastinated on implementing these promises. The government limited the price alignment rate to 69% for two consecutive years, maintaining it at pre-roadmap levels. Initially planning to unveil a revised plan in the latter half of 2023, it suddenly shifted direction, opting to restart discussions from scratch. Today, the government announced its sudden decision to completely abolish the plan, even before receiving the results of its commissioned research on the matter. Abolishing the plan requires amending the current Act on the Public Announcement of Real Estate Values, necessitating cooperation from the opposition party. Nonetheless, the government maintains it can resort to the quick fix of retaining the current 69% threshold if the revision plan fails to pass the National Assembly.

Some further argue that the government overlooks the true purpose and function of the official valuation system for real estate, solely emphasizing the potential tax relief from abolishing it. Initially, the policy of actualizing real estate values aimed to narrow the significant gap between official and market prices and to address taxation inequality. The official property value is a key index for various national administration and welfare systems, impacting aspects such as national health insurance contributions, senior pensions, disability pensions, and national scholarships. Therefore, any revision demands a profoundly cautious approach.

Rather than resorting to quick fixes, the government should devise a comprehensive mid-to-long-term plan to reduce the tax burden and promote fair taxation. This plan should address disparities such as the gap between housing prices in Seoul versus elsewhere and the discrepancies between apartment prices and those of individual residences. Additionally, efforts should be made to address opaque price evaluation issues. Merely raising the topic of tax reduction before the general elections, with promises to explore alternatives later if needed, is not a reasonable policy approach.