Next year’s publicly announced real estate price will rise or fall in proportion to this year’s market price. This is because the government decided to apply the publicly announced price realization rate (announced price compared to market price) at the 2020 level (69% for apartment complexes) before the establishment of the ‘announced price realization roadmap’. This means that the publicly announced price is not artificially adjusted, but is calculated by only reflecting the rate of change in the market price.
Park Cheon-gyu, head of the Housing and Real Estate Research Division of the Korea Research Institute for Human Settlements, who gave a presentation at the ‘Public Hearing on the Realization Plan for Real Estate Official Prices’ held by the Ministry of Land, Infrastructure and Transport at the Seoul Gangnam Branch of the Korea Real Estate Institute on the 15th, said, “Changes in the publicly announced price policy must be minimized.” “It is appropriate to set the target realization rate for 2025 (according to the roadmap) the same as 2020,” he suggested. This is in fact a government plan and will be confirmed after deliberation by the Central Real Estate Price Disclosure Committee.
The publicly announced price is the standard for determining 63 taxes and charges, including comprehensive real estate tax, property tax, health insurance premiums, and basic pension. The Moon Jae-in administration announced that it would gradually increase the public disclosure rate, which was 69% for apartment complexes in 2020, to 90% by 2030. For this reason, the public price rose more rapidly than the market price, causing a sharp increase in the tax burden, and a ‘reversal phenomenon’ in which the public price rose even when the market price fell occurred.
The government scrapped the roadmap in September of this year and introduced a new public price calculation method. To apply this method, the Real Estate Disclosure Act needs to be revised, but since the law has not yet been revised, it was decided to use a ‘temporary measure’ to lower the realization rate.
Reporter Kim Ho-kyung [email protected]
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How do publicly announced property prices affect taxes and charges for homeowners?
Interview Transcript: Time.news Editor and Park Cheon-gyu
Time.news Editor: Good morning, Park Cheon-gyu. Thank you for joining us today. I understand you recently presented findings at the public hearing on the realization plan for real estate official prices. Can you start by explaining the significance of the government’s decision to apply the publicly announced price realization rate from 2020?
Park Cheon-gyu: Good morning, and thank you for having me. The decision to revert to the 2020 realization rate, which was set at 69% for apartment complexes, is significant because it directly ties the publicly announced price to current market conditions. This avoids arbitrary adjustments and relies solely on market price changes. This approach is intended to stabilize the property taxation framework, which is heavily reliant on these publicly announced prices.
Time.news Editor: It sounds like there are strong implications for taxpayers here. How does the publicly announced price influence various taxes and charges?
Park Cheon-gyu: Indeed, the publicly announced price serves as a crucial standard for determining a variety of taxes and charges—including comprehensive real estate tax, property tax, and health insurance premiums. A higher publicly announced price can lead to an increased tax burden for property owners, making it essential for these prices to be realistic and reflective of the market.
Time.news Editor: You mentioned a “reversal phenomenon” where public prices increased even when market prices fell. Can you elaborate on that?
Park Cheon-gyu: Certainly. During the previous administration, the public price was projected to rise significantly, aiming for a realization rate of 90% by 2030. This rapid increase often outpaced the actual market performance, leading to situations where the officially announced prices would go up, even in declining market scenarios. This created financial stress for property owners and problems with tax equity.
Time.news Editor: With the recent scrapping of the previous roadmap and the introduction of a new calculation method, what can we expect moving forward?
Park Cheon-gyu: The shift marks a pivotal change. The government’s new approach is still pending a revision to the Real Estate Disclosure Act, with current measures serving as a temporary fix to adjust the realization rate. We anticipate some fluctuations as the market adapts, but if the realization policy is maintained and clearly communicated, it should alleviate much of the uncertainty that has plagued homeowners and investors.
Time.news Editor: Given these developments, what advice would you give to potential homeowners or investors in the current market?
Park Cheon-gyu: I would advise potential buyers and investors to stay informed about these policy changes. Understanding how official pricing works and its implications on taxes can provide a clearer picture of long-term ownership costs. It’s crucial to conduct thorough research and possibly consult with real estate experts to navigate this evolving landscape effectively.
Time.news Editor: Thank you, Park Cheon-gyu, for your insights. As this topic continues to develop, your expertise will undoubtedly be invaluable to our readers.
Park Cheon-gyu: Thank you for having me. I look forward to discussing more as these changes unfold.