Even Ultra-High-End Single Homes to Face Higher Property Tax

*Editor's Note: 'AI PRISM' (Personalized Report & Insight Summarizing Media) is an "artificial intelligence (AI)-based customized news recommendation and summary service" developed with support from the Korea Press Foundation. It selects and provides six customized news items by reader type.

1. If 'Market Value of 5 Billion Won' Becomes the New Threshold... A Considerable Number of Newly Built 30-Pyeong Apartments in Gangnam Would Be Included

Key Summary: With President Lee Jae-myung stating that he will raise the comprehensive real estate tax burden on ultra-high-end homes even for owner-occupied single homes, the creation of a separate tax base for the bracket of 4 billion won or more in market value has emerged as a leading option. President Lee's direct remark that he "expected it to be around 5 billion won" spread the view that 5 billion won is being seen as the benchmark line. Based on recent actual transaction prices, Raemian One Bailey's exclusive 84-square-meter unit (5.95 billion won) would be included, while Raemian Daechi Palace's exclusive 84-square-meter unit (4.4 billion won) would be excluded. The government plans to include specific standards and tax rates in the tax reform plan at the end of this month, following a tax debate on the 16th and a grand debate on the 23rd, so investors' attention is focused on changes in the tax burden for owners of newly built high-priced apartments in the Gangnam area.

2. [Exclusive] Public Survey on Ultra-High-End Threshold to Be Conducted... To Be Disclosed at Debate Chaired by President Lee on the 23rd

Key Summary: The government has decided to ask the public, through a survey, about the ultra-high-end home threshold for strengthening the comprehensive real estate tax. The survey is expected to be operated through the 'budongsandebate.kr' website with options of △3 billion to 4 billion won △4 billion to 5 billion won △5 billion won or more. The results will be disclosed and discussed at a public grand debate on real estate chaired by President Lee Jae-myung on the 23rd of this month, and the key issue is how much they will be reflected in the tax reform plan at the end of this month. The government plans to determine the final threshold by comprehensively considering the survey results, expert opinions, taxation equity, and actual tax burdens, so uncertainty surrounding the ultra-high-end threshold is expected to continue until the end of this month.

3. Oh Se-hoon: "Let's Raise Relocation Loan LTV to 70%," Proposes Eight Tasks

Key Summary: Seoul Mayor Oh Se-hoon proposed eight tasks to the government, including raising the LTV ratio for relocation loans in reconstruction and redevelopment projects from the current 60% to 70%, expanding the legal maximum floor area ratio for private redevelopment projects to 1.2 times the current level, and easing restrictions on the transfer of union member status. The rationale is that the private sector handles more than 90% of Seoul's housing supply, and the net increase in volume scheduled through reconstruction and redevelopment by 2031 alone reaches 85,000 households. In the private rental sector, he also proposed easing LTV regulations for purchase-type private rental operators and exclusion from the comprehensive real estate tax aggregation. From the perspective of reconstruction investors, since the expansion of relocation loan limits is directly linked to project speed, whether the government accepts it has emerged as a key variable.

4. Deposit Rates Rise... Chain Increase in Loan Rates Signaled

Key Summary: Deposit rates at commercial banks have been raised across the board, with Shinhan Bank raising its one-year time deposit rate from 3.0% to 3.2% per year. The average interest rate on 12-month time deposits at savings banks jumped 0.69 percentage points, from 3.24% in April to 3.93% as of the 13th of this month, with CK Savings Bank and Pepper Savings Bank reaching 4.45%. The yield on five-year government bonds also rose 0.605 percentage points, from 3.436% at the end of January to 4.041% on the 13th. With a Bank of Korea base rate hike considered likely, increases in new fixed-rate mortgage rates are also inevitable, so analysts say that investors using loans should move up the timing of locking in their rates or reexamine their fixed-versus-floating rate conversion strategies.

5. Early Compensation Begins for Gwangmyeong-Siheung Public Housing District... 67,000-Household Supply Gets a Tailwind

Key Summary: The Korea Land and Housing Corporation (LH) began the negotiated compensation procedure for the Gwangmyeong-Siheung public housing district (about 12.71 million square meters, 67,000 households), the largest in the third-phase new towns, on the 31st of this month, four months earlier than the originally planned November. The number of compensation recipients is about 13,000, and the negotiation procedure will proceed for five months from the 31st of this month until the end of the year, in the form of a package compensation for land, ground fixtures, and business rights. Follow-up procedures for relocation measures and living measures will continue with the goal of breaking ground at the end of next year. Analysts interpret that the acceleration of this district's project—which borders Seoul, offers excellent access to Yeouido, Guro, and Gasan Digital Complex, and is equipped with KTX Gwangmyeong Station and multiple highway networks—could have a medium- to long-term impact on existing real estate prices in the nearby southwestern metropolitan area.

6. "Let's Utilize Idle Land in Urban Centers"... Clash Over Public Contribution Ratio in Redevelopment Projects

Key Summary: At the "Listening Debate on Measures to Expand Housing Supply" hosted by the Ministry of Land, Infrastructure and Transport (MOLIT), the need to convert idle urban sites such as semi-industrial areas to residential use, and to convert unsold non-residential sites in third-phase new towns to residential sites, was raised. Regarding redevelopment projects, unions—who argue that project viability should be improved by reducing the public contribution ratio—clashed head-on with civic groups—who argue that the public rental ratio should be expanded from the current 35% to 50% or more. MOLIT Minister Kim Yoon-duk said he would reflect on-site opinions in real estate measures as much as possible. Since the direction of decisions on the public contribution ratio and floor area ratio is directly linked to the profitability of redevelopment projects, investors are in a situation where they must watch the finalized public rental ratio in the real estate measures to be announced at the end of this month.