Once the government finalizes its criteria for ultra-luxury homes, the property tax burden on single-home owners in Seoul's Gangnam district is projected to rise by more than 30%, according to an analysis. Some forecast a "threshold effect," in which property taxes change sharply depending on the ultra-luxury home benchmark the government sets.
On the 27th, The Seoul Economic Daily commissioned Woo Byung-tak, a Premier Path Finder expert at Shinhan Bank, to apply a "single-home ultra-luxury surtax plan" to 10 high-priced Seoul apartments. The result showed that the tax burden on homes with an assessed value in the 3 billion won range increased by up to 32.4% from the current level. The analysis assumed an ultra-luxury home benchmark assessed value of 3 billion won, and a scenario in which the basic deduction for single-home owners with an assessed value exceeding 3 billion won is lowered from 1.2 billion won to 900 million won, followed by application of the tax rate for owners of three or more homes.
Based on these assumptions, a simulation showed that the comprehensive real estate tax (including the special rural development tax) next year on the 84.97-square-meter unit of Acro River Park in Seocho-gu, Seoul, which has an assessed value of 3.934 billion won this year, would rise from 18.57 million won under the current tax system to 24.58 million won under the surtax plan, an increase of 6.01 million won (32.4%).
For a home with an assessed value of 3 billion won, lowering the basic deduction from 1.2 billion won to 900 million won raises the taxable base from 1.08 billion won to 1.26 billion won. The tax rate on the portion of the taxable base exceeding 1.2 billion won also rises from the general rate of 1.3% to the rate of 2.0% for owners of three or more homes.
The 120.82-square-meter unit of Dogok Rexle in Gangnam-gu, Seoul, which has an assessed value of 3.128 billion won this year, increased from 11.37 million won to 14.69 million won, up 3.32 million won (29.2%). The 84-square-meter unit of Banpo Xi in Seocho-gu, Seoul, with an assessed value in the 3.4 billion won range, rose from 14.91 million won to 19.04 million won, up 27.7%. The 84.93-square-meter unit of Raemian First Age in Seocho-gu, Seoul, in a similar price range, also increased from 16.54 million won to 20.82 million won, up 25.9%.
Homes with assessed values just above 3 billion won also showed increases in the 20% range. The 84.97-square-meter unit of Raemian Daechi Palace in Gangnam-gu, Seoul, rose from 12.47 million won to 15.23 million won, up 22.1%, while the 82.61-square-meter unit of Jamsil Jugong Complex 5 jumped from 10.95 million won to 13.31 million won, up 21.6%.
For ultra-luxury large homes with assessed values well above 3 billion won, the tax burden is expected to rise even more sharply. In the taxable base bracket of more than 2.5 billion won to 5 billion won, the general rate is 1.5%, but the rate for owners of three or more homes is 3.0%. In the bracket of more than 5 billion won to 9.4 billion won, the rates are 2.0% and 4.0%, respectively, a twofold difference.
As a result, the 235.31-square-meter unit of Hannam The Hill in Yongsan-gu, Seoul, whose assessed value next year is estimated at 9.67382 billion won, rose from 67.84 million won to 92.54 million won, up 24.7 million won (36.4%). The comprehensive real estate tax burden on a single home approaches 100 million won.
The 112.96-square-meter unit of Acro River Park increased from 33.93 million won to 44.55 million won, up 10.62 million won (31.3%). The 114.17-square-meter unit of Raemian Daechi Palace also rose from 22.65 million won to 30.21 million won, up 7.56 million won (33.4%), exceeding the 30 million won mark.
Eunma Apartment in Gangnam-gu, Seoul, which newly crosses the 3 billion won line due to a rise in assessed value, is also included among the surtax targets. The assessed value of Eunma's 84.43-square-meter unit is estimated to rise from 2.681 billion won this year to 3.09618 billion won next year. The comprehensive real estate tax and special rural development tax burden increases from the current 8.32 million won to 10.3 million won under the surtax, up 1.98 million won (23.8%).
However, it remains uncertain whether the single-home ultra-luxury surtax will immediately lead to an increase in listings. Even if the property tax rises by several million to tens of millions of won, the capital gains tax owed when selling the home could reach tens of billions of won.
"When comparing the capital gains tax burden with the property taxes to be paid over the coming years, many will choose to hold on while paying the property tax," Woo said. "Listings may emerge only from some elderly people or retirees with insufficient cash flow."
