Even with CREHT Deduction Raised to 1.4 Billion Won... Gangseo and Eunpyeong Enter Taxable Bracket

Seoul Homes Assessed at Over 1.4 Billion Won
More Than 40,000 More Than Last Year

Even if the basic deduction for comprehensive real estate holding tax (CREHT) for single-homeowners were standardized at 1.4 billion won in assessed value, regardless of whether they live in the property, Seoul would still have more than 40,000 additional taxable homes compared with last year. The Democratic Party of Korea recently told the government that it supports setting the basic CREHT deduction at 1.4 billion won in assessed value regardless of residency. But rising home prices have instead increased the number of taxable homes. Outlying Seoul districts such as Gangseo-gu and Eunpyeong-gu, which had not had a single apartment with an assessed value exceeding 1.4 billion won, have now entered the taxable bracket. With many Han River Belt apartments in the 1.2 billion-to-1.4 billion won range, the number of homes subject to CREHT in Seongdong-gu and Mapo-gu, where prices have risen 8-9% this year, is expected to increase further next year if this year's sharp price gains are reflected in assessed values.

According to data titled "Housing by Assessed-Value Bracket in Each Seoul District," which the Ministry of Land, Infrastructure and Transport submitted to the National Assembly on November 10, Seoul had 321,831 multi-family homes with assessed values exceeding 1.4 billion won this year. That is 14.8%, or 41,466 homes, more than the 280,365 homes assessed at over 1.2 billion won, the CREHT threshold last year.

By district, Gangseo-gu and Eunpyeong-gu, which had no homes assessed at more than 1.4 billion won through last year, entered the taxable bracket. In Gangseo-gu, 282 homes became subject to CREHT, while one home entered the bracket in Eunpyeong-gu. In Seodaemun-gu (from 3 to 625 homes), Dongdaemun-gu (from 8 to 138) and Guro-gu (from 4 to 65), the number of taxable homes surged from single digits to more than 10.

The number of Seoul districts with homes assessed at over 3 billion won also rose from 12 last year to 15 this year. Such homes appeared for the first time in Gangdong-gu (4 homes), Seongbuk-gu (2) and Dongdaemun-gu (1). However, Nowon-gu, Dobong-gu and Gangbuk-gu, collectively known as Nodogang, where mid- and lower-priced apartments are common, as well as Geumcheon-gu and Gwanak-gu, had no homes assessed at over 1.4 billion won this year, just as last year.

In August, the government proposed a tax reform plan for next year that would raise the deduction for owner-occupied single-homeowners from 1.2 billion to 1.4 billion won, while lowering it to 900 million won for single-homeowners who do not live in their homes. But after criticism that the owner-occupancy requirements and other conditions were excessively rigid, the government decided to keep the deduction for non-resident single-homeowners at the current 1.2 billion won. As rent and lease-market turmoil continued, the ruling party then called for the same 1.4 billion won deduction to apply to non-resident single-homeowners as well.

If the ruling party's proposal is adopted, homes owned by single-homeowners would be excluded from CREHT among the 92,584 Seoul homes assessed at more than 1.2 billion won and up to 1.4 billion won this year, which account for 3.33% of all homes. The beneficiaries would include areas in southern Seoul and along the Han River Belt, particularly Songpa-gu (13,431 homes), Gangdong-gu (11,008), Seongdong-gu (10,246), Gangnam-gu (8,974), Seocho-gu (8,756) and Mapo-gu (8,175). However, the 1.4 billion won deduction applies only to single-homeowners, and the statistics also include homes owned by multi-homeowners and corporations, so the number of homes actually excluded would be smaller.

Apartment complex in Songpa-gu, Seoul. Photo by Kang Jinhyung.

As home prices have surged this year, some Han River Belt homes are expected to become subject to CREHT again next year. Next year's tax, under the new threshold, will be based on assessed values that reflect this year's home-price changes. In other words, assessed values of major Han River Belt apartment complexes currently in the range of more than 1.2 billion won and up to 1.4 billion won could exceed 1.4 billion won again.

Woo Byung-tak, a specialist committee member at Shinhan Premier Pathfinder, estimated next year's assessed values and property taxes for owner-occupied single-homeowners based on market-price changes through September this year. His estimate puts the assessed value of an 84-square-meter unit at Centras in Hawangsimni-dong, Seongdong-gu, at 1,487,570,000 won next year, up from 1,366,000,000 won this year. Even with the basic deduction raised to 1.4 billion won, the home would remain subject to CREHT next year, and its property tax would rise from 2,757,000 won this year to 2,817,000 won. The assessed value of an 84-square-meter unit at Dangsan Raemian 4th in Yeongdeungpo-gu is also expected to rise from 1,371,000,000 won this year to 1,740,350,000 won next year. In that case, its property tax would increase 26.9%, from 2,842,000 won this year to 3,606,000 won next year.

Outlying areas of Seoul are not necessarily in the clear, either. According to weekly statistics from the Korea Real Estate Board, the Seoul districts with the largest home-price increases from the start of this year through the first week of November were Seongbuk-gu (16.90%), followed by Seodaemun-gu (14.42%), Gangseo-gu (13.33%), Guro-gu (13.32%) and Dongdaemun-gu (13.05%). The number of homes subject to CREHT is expected to grow, particularly among newly built apartments.

"The increase in homes assessed at over 1.4 billion won outside Gangnam is likely due to rising prices at newly built apartments near transit stations and mixed-use complexes, such as DMC Parkview Xi and e-Pyeonhansesang Sinchon in Seodaemun-gu, and Raemian La Grande and Lotte Castle SKY-L65 near Cheongnyangni Station in Dongdaemun-gu," said Ham Young-jin, head of Woori Bank's Real Estate Research Lab. "Even among outlying districts, the situation varies depending on whether a home is newly built, how large it is and whether it is near a transit station."

However, the tax burden next year is expected to be lighter than initially projected in Gangnam-gu and Seocho-gu, where home prices fell this year. In Woo's simulation, if the assessed value of an 84-square-meter unit at Eunma Apartment in Daechi-dong, Gangnam-gu, stays at this year's level of 2,681,000,000 won next year, its property tax under the government's revised tax reform plan would be 12,345,000 won. That is about 1,360,000 won less than the previous estimate of 13,706,000 won, which assumed the assessed value would continue to rise next year. Under the same conditions, the tax would be 570,000 won lower than the previous estimate for an 84-square-meter unit at Raemian Daechi Palace in Daechi-dong (18,551,000 won), and about 970,000 won lower for an 82-square-meter unit at Jamsil Jugong Complex 5 in Songpa-gu (15,947,000 won).

Property taxes on ultra-high-priced homes can rise even if their assessed values do not. An 84-square-meter unit at Banpo Xi in Seocho-gu would have a property tax of 22,574,000 won next year even if its assessed value remains at this year's level of 3,491,000,000 won. That is higher than both this year's tax payment of 18,097,000 won and the previous estimate of 22,285,000 won. This reflects the government's revised plan to raise the ratio of assessed value used to calculate tax from 60% to 70% and increase tax rates for higher-value properties, while raising the basic deduction to 1.4 billion won.

"As the projected increase in assessed values next year slows considerably in the three Gangnam districts and other areas, property taxes could be hundreds of thousands of won lower than under the previous assumption that assessed values would rise by about half this year's increase," Woo said. "By contrast, because outlying Seoul districts with high market-price growth were not previously subject to CREHT, only a very small number of complexes are likely to newly enter the taxable bracket, even if home prices have risen."

Analysts say that raising the deduction will not greatly reduce the overall number of taxable homes, as few homes in the Gangnam area will drop out of the bracket while more major complexes outside Gangnam, including those along the Han River Belt, enter it. "In the Gangnam area, where home prices have recently fallen, the homes are mainly expensive redevelopment complexes, so they will not fall below an assessed value of 1.4 billion won. Meanwhile, complexes in areas where prices rose this year will newly enter the taxable bracket," said Yoon Soo-min, senior real estate specialist at NH NongHyup Bank. "There are also concerns within the ruling party that the tax burden is excessive, along with calls to moderate the pace of increases in the assessed-value ratio. So it may rise more gradually than previously planned."

This content was produced with the assistance of AI translation services.