Gift Transactions Account for 6.8% of All Apartment Deals Until August... Record High

Due to Tax Burden and Rising Home Price Expectations... Seoul Gift Tax Share Increased from 3.9% in 2017 to 13.8% This Year

[Image source=Yonhap News]

[Asia Economy Reporter Kim Min-young] The proportion of apartment gifts this year has reached an all-time high as expectations for rising housing prices and the desire to reduce tax burdens coincide. In Seoul, gifts accounted for 13.9% of all transactions.

According to the Korea Real Estate Board's apartment transaction status (based on reporting date) on the 5th, the total number of apartment gifts nationwide from the beginning of this year to August was 58,298. This corresponds to 6.8% of the total 853,432 transactions during this period, including sales, judgments, exchanges, pre-sale rights transfers, and other ownership transfers.

In terms of the proportion of gifts alone, this is the highest for the January to August period since related statistics began in 2006. This is believed to be because the tax burden has increased due to the strengthening of comprehensive real estate tax (종부세) and capital gains tax (양도세) on multi-homeowners, leading many to adopt gifting as an exit strategy rather than holding or selling. Currently, the gift tax rate for multi-homeowners ranges from 10% to 50%, which is lower than the capital gains tax rate of 16% to 75%.

In Seoul, during the same period, out of 74,205 total transactions, 10,355 were gifts, accounting for 13.9% of all transactions, marking a record high. The proportion of gifts in total transactions in Seoul has shown a rising trend for four consecutive years, increasing from 3.9% in 2017 to 9.5% in 2018, 11.2% in 2019, 12.2% last year, and 13.9% up to August this year. The proportion of gifts nearly quadrupled in four years. The district with the highest gift proportion during this period was Gangdong-gu (28.5%), followed by Songpa-gu (27.1%), Gangnam-gu (20.9%), and Yangcheon-gu (16.0%).

Meanwhile, last year, the number of apartment gifts nationwide was 91,866, and in Seoul, it was 23,675, the highest annual figures since related statistics began in 2006. The period when gifts were concentrated was July last year, when the government announced a plan to raise the acquisition tax rate on gifts. At that time, the government announced an amendment to the Local Tax Act, which raised the acquisition tax rate that the recipient must pay from the existing 3.5% to up to 12.0% for gifts of homes worth more than 300 million KRW in regulated areas. This led to a temporary surge in gifts ahead of the amendment's enactment.

The trend of apartment gifting is expected to continue due to the strengthening of comprehensive real estate tax and capital gains tax. From this year, the highest comprehensive real estate tax rate for multi-homeowners increased from 3.2% to 6.0%, and the highest basic capital gains tax rate rose from 42.0% to 45.0%, increasing the tax burden further.

Yoon Ji-hae, senior researcher at Real Estate 114, said, "Multi-homeowners are increasingly circumventing holding or selling by gifting due to the strengthening of comprehensive real estate tax and property tax," adding, "The anxiety that it will be difficult for children to secure their own homes if current housing prices are maintained, and the purpose of sharing the increase in housing prices with family members, are also reasons for the increase in gifting."

This content was produced with the assistance of AI translation services.