An analysis found that owning three apartments priced at 2.3 billion won each in Seoul results in an annual property holding tax of 48.54 million won. That is 22% more than New York under the same conditions and more than double Singapore. By contrast, if a person lives in one dwelling priced at the Seoul median of 1.05 billion won, the annual holding tax was 1.07 million won. The burden on single-dwelling owner-occupiers is relatively small, but a strong progressive structure applies when owning multiple high-priced dwellings.
According to the Seoul city-commissioned research project "Comparison of property holding taxes in major global cities," obtained by ChosunBiz on the 10th, a comparison of taxes due when holding dwellings of the same price in six cities—Seoul; New York and Los Angeles (LA) in the United States; Tokyo in Japan; London in the United Kingdom; and Singapore—showed these results.
A research team led by Professor Lee Gwan-ok of the Department of Real Estate, Business School, National University of Singapore, conducted the study under commission from the Seoul city government. The team divided dwelling prices into three tiers—the top 10%, 25%, and 50%—based on last year's actual apartment transaction prices in Seoul. It then calculated holding taxes for a total of 36 cases by reflecting the number of dwellings owned and whether they were actually occupied.
◇ Holding tax on three high-priced dwellings in Seoul is double Singapore
If a person owns three dwellings priced at 2.3 billion won each—corresponding to the top 10% of apartment prices in Seoul—with one used as a primary residence, the annual holding tax was calculated at 48.54 million won. Among the six cities compared under the same conditions, that was the second highest after LA's 53.81 million won.
In New York, the tax for owning three dwellings at the same price was 39.59 million won. Seoul is 8.95 million won, or 22.6%, higher than New York. Singapore's holding tax was 23.56 million won, less than half of Seoul's.
The research team said that in Seoul, the comprehensive real estate tax is imposed by aggregating the publicly announced prices of owned dwellings, and the progressive tax structure—where rates rise as the tax base increases—has raised the burden on owners of multiple high-priced dwellings.
The burden of holding taxes relative to income was found to be highest in Seoul. For a person in the top 10% income bracket earning 126 million won a year and owning three dwellings priced at 2.3 billion won each, the holding tax amounted to 38.5% of income (48.54 million won).
Under the same conditions, the holding tax burden as a share of income was 22% in New York, 13.8% in Tokyo, 11.1% in LA, 6.9% in Singapore, and 6.5% in London. In Seoul, not only is the absolute amount of holding tax high, but the burden relative to income is also high.
◇ Single-dwelling owner at 1.05 billion won pays 1.07 million won a year
The burden on single-dwelling owner-occupiers was relatively small. If a person owns and lives in one dwelling priced at 1.05 billion won, the median apartment price in Seoul, the annual holding tax was calculated at 1.07 million won. Because the publicly announced price does not reach 1.2 billion won, the basic deduction threshold for the comprehensive real estate tax for a single household with one dwelling, only the property tax was imposed without the comprehensive real estate tax.
Singapore, which applies a lower tax rate to owner-occupied dwellings, was the lowest at 580,000 won. Seoul followed, then London at 4.05 million won, New York at 4.24 million won, Tokyo at 4.83 million won, and LA at 8.07 million won. Seoul's holding tax was about 25% of New York's and 13% of LA's.
Even when actually living in one dwelling priced at 2.3 billion won, Seoul's holding tax was 4.81 million won, the second lowest after Singapore's 2.42 million won. New York was 11.27 million won and LA was 17.84 million won.
The burden of holding taxes relative to income showed a similar pattern. In Seoul, if a person earning the median income of 65 million won lives in one median-priced dwelling, the holding tax burden was 1.6% of income. In New York, it was found that if a person earning the median income of $149,000 lives in one median-priced dwelling at $1.27 million, 7.4% of income goes to holding taxes.
Professor Lee said, "Seoul's holding tax may appear low for single-dwelling owners, but a strong progressive structure applies when owning multiple high-priced dwellings."