Seoul City is expected to collect more than 10 trillion won next year in real estate-related taxes such as acquisition tax and property tax. That is an increase of nearly 10% from this year. The city expects tax revenue to rise due to surging real estate prices, prompting criticism that only local government coffers are swelling as home prices climb.
According to the "2026 budget proposal" that Seoul City submitted to the Seoul Metropolitan Council on the 16th, local government tax revenue next year is expected to total 26.3543 trillion won. That is up 5.8% (1.4418 trillion won) from this year's budgeted amount of 24.9125 trillion won. Kim Tae-gyun, Seoul's first vice mayor for administration, said at the Special Committee on Budget & Accounts on the 3rd that the city raised its local government tax revenue forecast to "reflect the government's recent real estate measures and transaction trends."
Local government tax consists of several items, and acquisition tax and property tax, which are real estate-related taxes, account for about 40% (based on next year's budget). The city budgeted on the assumption that acquisition tax, which was expected to bring in 5.6005 trillion won this year, will rise 10.6% (595 billion won) next year to surpass 6 trillion won. Property tax is also forecast to increase 7.0% (257.7 billion won), from 3.6829 trillion won to 3.9406 trillion won. The combined total of the two taxes next year will be 10.1361 trillion won, up 9.2% from a year earlier.
Acquisition tax is levied when acquiring real estate, among other assets. The base rate is 1%–3%, but it can be surcharged up to 12% depending on whether the area is regulated and whether the buyer owns multiple homes. If a first-time homebuyer purchases an apartment in Seoul, a regulated area, for 1.3 billion won (the average apartment sale price in Seoul last month), the acquisition tax due is about 43 million won (3% rate). If a two-home owner buys an additional home, the acquisition tax comes to about 160 million won (12% rate). Property tax is imposed on those who own dwellings, land, and buildings, and its rate, at 0.1%–0.4%, is lower than the acquisition tax.
Although dwelling transaction volume has plunged due to the government's expansion of land transaction permit zones and tighter lending rules, analysts say tax revenue is expected to rise as home prices have climbed sharply and, in turn, officially assessed values have increased. Seoul home prices have risen more than 10% on average this year. According to Real Estate R114, as of the end of November this year, the market price of Seoul apartments was 47.85 million won per 3.3 square meters, up 11.5% from 42.9 million won in December last year. The view that home prices will inevitably rise next year due to supply shortages is gaining traction. In Seoul, the number of apartment move-ins will drop by nearly 32%, from 42,684 units this year to 29,088 units next year.
A real estate industry official said, "In 2021, when 'panic buying' ran rampant, Seoul City collected 7 trillion won in real estate acquisition tax alone. Expectations for rising home prices are returning to those levels, and there is talk of easing regulations on permit zones before the local elections, so tax revenue is highly likely to increase," adding, "This will increase the tax burden on citizens while only fattening local governments."