Value context and insight. lkm@koreatimes.co.kr
Korea's tax on real estate trading highest among OECD
A woman looks at a list of offerings of rent and sales of apartments put up on the entrance of a real estate agent's office in Seoul. Korea Times file
By Lee Kyung-min
By Lee Kyung-min
The tax on real estate transactions compared to the country's GDP was the highest for Koreans in 2018, strengthening calls for revisions to the government's botched real estate policies over the past few years to lower the tax to encourage multiple home owners to sell their properties.
Data submitted by the National Assembly Budget Office (NABO) to Rep. Jeong Jeong-soon of the ruling Democratic Party of Korea, showed Koreans paid an aggregate 27.4 trillion won ($22.7 billion) in taxes on property transaction in 2018, accounting for 1.5 percent of the country's nominal GDP. This is the highest among OECD member countries, followed by Australia (1.3 percent), Belgium and Italy (1.1 percent). The figure was 0.4 percent for Germany, 0.3 percent for Japan and 0.1 percent for the U.S. The OECD average was 0.4 percent.
The tax paid by Koreans for owning real estate was 15.6 trillion won in 2018, or 0.9 percent of GDP, this time much lower than the OECD average of 1.1 percent. Korea came in 17th, while Canada and the U.K topped the list with 3.1 percent, followed by the U.S. (2.7 percent).
Reducing the transaction tax is inevitable for the government to achieve its much-elusive goal of having multiple home owners sell their properties, thereby increasing supply in the market, Jeong said.
“The government policy implementation should follow a thorough review of factors that directly lead to spikes in home prices, a necessary step to limit confusion experienced by jeonse tenants,” he said. Jeonse is a uniquely Korean way of renting a home whereby tenants pay landlords a lump sum instead of a monthly rent.
The report comes amid escalating criticism of government real estate policy that has seen a 52 percent increase of the median price of apartments in Seoul over the past three years. The increase of 314 million won is double the 134 million won during the term of former President Park Geun-hye between 2013 and 2017.
Similarly, Bank of Korea data showed the combined value of homes in Korea exceeded 5,000 trillion won in 2019, the highest since 1995 when the central bank began compiling related data.
The nominal combined value of homes in Korea was 5,560 trillion won, up 7.4 percent from 4,700 trillion won a year earlier.
This is a much faster rise given the value first topped 1,000 trillion won in 2000, before it hit 2,000 trillion won in 2006, 3,000 trillion won in 2010 and 4,000 trillion won in 2016.