The real estate price realization rate in 2023 to the level of 2020

It is expected that the government will return to the level of 2020 next year’s real estate public price realization rate (the ratio of public price to market price). Recently, as house prices have fallen sharply and the reverse phenomenon in which the official price exceeds the actual transaction price has occurred one after another, the government is considering a plan to drastically reduce the official price, which is the basis for various real estate taxes.

On the 22nd, the Ministry of Land, Infrastructure and Transport held a ‘Public Hearing on Real Estate Announced Price Realization Plan’ at the Seoul Gangnam Branch of the Korea Real Estate Agency. Professor Yoo Seon-jong of Konkuk University, who is a member of the advisory committee for experts on improving the disclosure system, suggested at this meeting, “It is desirable to return the official price realization rate to the 2020 level in terms of excessive public burden increase and price balance improvement.”

In September 2020, the Moon Jae-in administration announced the ‘Real Estate Price Realization Roadmap’, which aims to raise the official real estate price to 90% of the market price over 10 years. As a result, the national average realization rate of apartment houses, which was 69.0% in 2020, rose to 70.2% last year and 71.5% this year. According to the existing goal, the goal of this public hearing is to return the realization rate, which should rise to 72.7% next year, to the level before the plan was announced.

According to the proposal, the actualization rate applied next year will be an average of 69.0% for multi-family housing such as apartments, which will be lower than this year’s 71.5%. It is a much stronger amendment than the freeze plan proposed by the Korea Institute of Public Finance in the first public hearing.

By price range, the realization rate applied to apartments with less than 900 million won is 68.1%, 69.2% for 900 million won to less than 1.5 billion won, and 75.3% for 1.5 billion won or more. Compared to this year, those with less than 900 million won will drop by 1.3 percentage points, those with 900 million won to less than 1.5 billion won, and 1.5 billion won or more will drop by 5.9 percentage points each.

Professor Yoo said, “If the recent real estate market situation continues until next year, the reversal phenomenon in some apartment houses could extend to detached houses and lands with low price sensitivity.” It should be adjusted to the level of 2020 before implementation,” he explained the background of the proposal. The published price is used as a standard for 67 administrative systems, including health insurance premiums and basic pension, as well as various real estate-related taxes such as comprehensive real estate tax and property tax.

The government will finalize the revision of the official price realization rate within this month. It is highly likely that the final plan will be promoted as suggested at this public hearing.

Reporter Park Se-joon [email protected]

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