Vol. 18 The Effect of Official Housing Price Increase on the Housing Property Tax (English Edition)

June 9, 2020. Vol. 18

Official housing price trends and government policy

* The government sets the official housing price every year by evaluating reasonable house prices, and uses this price a tax base for the real estate holding tax(gross real estate tax and property tax), which has a direct impact on tax revenue.
  - The term “reasonable price” refers to the price at which trade is deemed most likely to be affected if normal transactions take place in an ordinary market.

* In 2020, the official housing price for multi-family housing increased mainly for high-priced houses with a market price of KRW 900 million or more because a different market price reflection rate* was applied to the official housing price.
  - The market price increase rate was higher in for high-priced housing than for low-priced housing.
  - According to the “2020 Real Estate Price Disclosure Promotion Plan”(Dec 17, 2019), the government increased the market price reflection rate centered for expensive multi-family houses in 2020.
    • The government promoted a policy designed to reverse a phenomenon that gave high-priced housing a lower market price reflection rate than mid- to low-end housing.
    • (Market price reflection rate for houses below KRW 900M) 68.4% in 2019 → 68.1% in 2020 (Market price reflection ratio for houses above KRW 900M) 67.1% in 2019 → 72.2% in 2020
    * Market price reflection rate = official housing price/market price × 100(%)