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| A view of an apartment complex around Seoul from 63 Art, Yeongdeungpo-gu, Seoul. 2021.3.9/News1 © News1 Reporter Kim Jin-hwan |
The rate of monthly rent conversion is expected to accelerate as the published price of apartments in Seoul rises sharply. It is expected that the real estate industry will have a tendency to respond to the burden of increasing the holding tax due to the increase in the published price by converting the monthly rent. Contrary to the intention of the policy for realizing the public price, there are voices that it is necessary to adjust the speed as it leads to damage to the transfer of tenants.
According to the Ministry of Land, Infrastructure and Transport and the real estate industry on the 17th, the official price of apartments in Seoul this year rose an average of 19.91%. It is the highest rate ever, surpassing last year’s increase (17.75%). Even in the national standard, if it rose more than 19%, it reached the highest level in 14 years.
The landlord’s dissatisfaction is also pouring into the rise of the publicly priced price. After reading the official price of apartment houses on the 16th, the online real estate community has become a burial ground for the official price. Mr. A, who owns two apartments in the metropolitan area, criticized, “If the price of real estate goes down when selling a house, will you also recover the’lost loss’ of real estate?”
The increase in the quoted price naturally leads to an increase in the holding tax (property tax + comprehensive real estate tax).
Those subject to the taxation tax are burdened with an increase in the holding tax at a higher level than the increase in the published price. This is because the tax system is a progressive system. In particular, this year, the burden of ownership tax for multi-homed people as well as one high-priced apartment is expected to increase significantly.
The public price this year is 1.55 billion won for an area of 76m2 for Eunma Apartment in Daechi-dong, Gangnam-gu. It increased 160 million won (11.5%) from last year (1.39 billion won). The increase in the publicly priced price is less than the Seoul average, but the ownership tax increases by 2.84 million won (50.6%) from 5.15 million won last year to 8.45 million won this year. The increase rate of the ownership tax reached more than four times the rate of the increase in the published price, and the burden of the ownership tax for multi-homeowners increased exponentially. The three houses in Gangnam, calculated by the Ministry of Land, Infrastructure, and Transport this year, amounted to 2.5 times more than last year’s (100 million won) with a holding tax of 250 million won.
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| A real estate agency in Nowon-gu, Seoul. 2020.10.27/News1 © News1 Reporter Heo Kyung |
The real estate industry predicted that a’separation of ownership and residence’ could occur due to an increase in the holding tax burden due to an increase in the published price. For example, retired landlords who do not have a certain income will increase the number of retired landlords living on low-cost suburbs by renting their homes.
In particular, he emphasized that the tendency of landlords to prefer monthly rent to cheonsei will become more pronounced due to the increase in the ownership tax. He said he would choose a method to reduce the tax burden by turning the jeonse into monthly rent to secure cash.
According to the Seoul Real Estate Information Plaza, the proportion of monthly rent transactions in Seoul in February was around 32%. The share of monthly rent transactions, which soared to 40% (November) after the lease law was implemented at the end of July last year, has declined this year.
Park Won-gap, senior real estate expert at KB Kookmin Bank, said, “There is a possibility that the tendency to prefer monthly rent, which is a kind of cash flow rather than cheonsei, is remarkable due to the burden of holding taxes such as property tax and taxation. said.
Kyu-gyu Kim, head of the Korea Investment & Securities Institute’s Asset Succession Research Institute, said, “The easiest way to transfer the holding tax is monthly rent.”
He added, “The market for jeon and monthly rent continues, and (high jeon and monthly rent prices) have the effect of supporting the trading price.”