Rising assessed prices a key variable

Multi-home owners at combined market value of 3 billion won to face 5.1 times heavier burden

Calls for supplementary measures for elderly taxpayers

The government's overhaul of the comprehensive real estate tax could generate at least 1.5 trillion won ($1.12 billion) more in revenue over the next five years than the government has projected, according to an analysis by the National Assembly Budget Office. The office also said the reform could sharply increase the tax burden on multi-home owners and some elderly taxpayers, calling for supplementary measures.

According to the office's "Analysis of the 2026 Tax Law Amendment" report released Thursday, the revenue increase from changes to the comprehensive real estate tax system between 2027 and 2031 is estimated at 12.56 trillion won. That is 1.53 trillion won more than the government's own projection of 11.03 trillion won, a figure that includes the rural special tax and represents the cumulative annual increases compared with this year.

Apartment complexes in Seoul as seen from Namsan. [Yonhap]
Apartment complexes in Seoul as seen from Namsan. [Yonhap]

The comprehensive real estate tax showed the largest gap between the government's and the assembly office's revenue estimates among all items in the tax law amendment. For the overall package, the assembly office projected a revenue increase of 14.54 trillion won against the government's 13.17 trillion won — a difference of 1.37 trillion won. The total gap narrowed because the assembly office's estimates came in lower than the government's on other reform items.

The core reason for the divergence in revenue forecasts was a difference in assumptions about future changes in officially assessed property prices. The government calculated its revenue estimate without factoring in any change in assessed prices, while the assembly office incorporated the recent upward trend. The office reasoned that higher assessed prices would raise the tax base, amplifying the revenue effect of increases in both the tax rate and the fair market value ratio. To estimate the 2027 assessed price change rate, the office drew on 2025 comprehensive real estate tax data, distinguishing taxpayers by residency status and number of homes held, and used regional housing transaction volumes and price indexes from January through July of this year.

The core of the government's real estate tax reform plan is to raise the fair market value ratio and tax rates while shifting from a system that differentiates rates by number of homes owned to one centered on property value. The statutory floor for the fair market value ratio rises from 60 percent to 70 percent, and from 2028 owners of three or more homes will face a ratio of 80 percent. The top tax rate will increase from 2.7 percent to 3.5 percent in 2027 for owners of two or fewer homes, then a uniform rate of 5 percent will apply from 2028 regardless of the number of homes held.

The taxable threshold for single-home households will rise from an assessed price of 1.2 billion won to 1.4 billion won, but the basic deduction will be applied on a differentiated basis — 1.4 billion won for owner-occupants and 1.2 billion won for non-residents. The tax credit based on years of ownership will be converted to a credit based on years of residency, with caps set at 8 million won in 2027 and 6 million won from 2028 onward.

In comparing the tax burden by taxpayer, the assembly office assumed assessed prices at 69 percent of market value and held assessed prices constant from 2027 onward. The analysis also excluded the tax burden cap and the age- and long-term residency-based tax credits available to single-home owners.

The analysis found that the gap in tax burden between single-home and multi-home owners could widen in certain price ranges. This is because the basic deduction amount and the fair market value ratio will continue to be applied on a differentiated basis even as the tiered rate structure based on number of homes is abolished.

For taxpayers whose combined market value of homes is 3 billion won, the comprehensive real estate tax burden for a three-home owner currently stands at 3.42 million won — 1.6 times the 2.11 million won borne by a single-home owner. By 2028, those figures will reach 9.4 million won and 1.84 million won respectively, widening the gap to 5.1 times. At a combined market value of 5 billion won, the three-home owner's burden will expand from 1.4 times to 2.1 times that of a single-home owner by 2028, while in the 10 billion won range the ratio will narrow from 1.8 times to 1.5 times.

Given these disparities, the assembly office said it is necessary to review whether the degree of differentiation by number of homes is appropriate in line with the intent of shifting to a property-value-centered rate structure.

The analysis also identified a "threshold effect" in which the tax burden spikes sharply near the taxable threshold. For taxpayers with a combined market value of 1.4 billion won, the comprehensive real estate tax burden after the reform is projected to be 5.6 times the current level for two-home owners and 8.3 times for three-home owners. The assembly office said the mismatch between the taxable threshold and the basic deduction amount could cause the tax burden to surge the moment a taxpayer enters the taxable bracket, and called for a review of fairness among taxpayers.

The office also raised concerns about the growing tax burden on elderly long-term residents. Even with the introduction of a cap on the single-home tax credit and an expansion of the deferred payment scheme, deferral only delays the point of payment. The assembly office proposed measures such as applying differentiated credit caps based on age and length of residency to account for the limited cash income of elderly taxpayers.

The revenue estimate assumes the reform takes effect in 2027 and remains in place through 2031, and does not account for changes in taxpayer behavior. Actual revenue could differ depending on future movements in assessed property prices and other factors.


y2k@heraldcorp.com