As the government decided to overhaul the system for calculating officially assessed real estate prices starting next year, the ruling party has begun in earnest to revise related laws.
According to political circles on the 5th, Maeng Sung-kyu of the Democratic Party of Korea, Chairperson of the National Assembly Land Infrastructure and Transport Committee, on the 30th of last month introduced as lead sponsor a partial amendment bill to the Act on the Public Notice of Real Estate Prices. The main point of the amendment is to require the Minister of Land, Infrastructure and Transport to set a target rate for reflecting market prices (realization rate) so that officially assessed prices can reflect appropriate prices, and to establish plans in five-year units. The current law only states that plans must be established as prescribed by Presidential Decree.
In the current law, an appropriate price means the market price, and the officially assessed price is the value obtained by multiplying that by the market price reflection rate. Officially assessed prices are used as basic data for taxation, including property tax and the comprehensive real estate tax. They are also used as criteria for calculating health insurance premiums and selecting recipients of the basic pension and the basic livelihood guarantee.
The amendment also changes the definition of appropriate price from the price recognized as the highest in a market transaction to a public reference price evaluated through the market price plus the market price reflection rate determined by the Minister of Land, Infrastructure and Transport (MOLIT). Under the current law, officially assessed prices must be calculated only as the appropriate price reflecting market value, but in practice MOLIT applies different market price reflection rates to artificially adjust officially assessed prices, which critics say is contradictory.
The government and the ruling party moved to overhaul the calculation system for officially assessed prices to resolve mistrust in the market. Officially assessed prices have repeatedly been criticized for lacking policy consistency and having unclear calculation grounds. In 2020, the Moon Jae-in administration said there was a large gap between officially assessed prices and market prices and implemented a road map to realize officially assessed prices to narrow that gap, saying it would raise the market price reflection rate for multifamily housing to 90% by 2030. But after the Yoon Suk-yeol administration took office in 2022, the road map was scrapped, and the market price reflection rate has been frozen at 69% for the three years from 2023 through this year. Officially assessed prices also did not rise significantly.
To resolve controversy over opaque calculations, the amendment also includes installing Officially Assessed Price Verification Support Centers at local governments in all provinces and metropolitan cities nationwide. Currently, the Korea Real Estate Board (REB) sets officially assessed prices for apartments and other multifamily housing and for standard single-family homes, while certified appraisers set officially assessed prices for standard sites (land), and based on these, each local government sets officially assessed prices for individual land and single-family homes. As criticism has grown that prices set by the REB or appraisers do not adequately reflect reality, the core of the plan is to have metropolitan local governments continuously verify the entire process by which the government calculates officially assessed real estate prices.