Gangnam Apartment Gifts Increase 6.3 Times Compared to Previous Month
Rising Property Taxes Lead to Gift Transfers, Not Sales
Choice Reflects Expectation of Price Increase Rather Than Decline
Inheritance and Gift Tax Signboard at a Tax Accountant Office in front of Gangnam Tax Office, Gangnam-gu, Seoul [Image source=Yonhap News]
"Multi-homeowners bet on rising house prices, not falling ones." This is the market's assessment of the record increase in apartment gifts in Gangnam-gu, Seoul last month. This trend is completely different from the government's expectation that house prices would stabilize if multi-homeowners disposed of surplus homes ahead of the upcoming strengthening of property tax and capital gains tax in June.
According to the monthly apartment transaction status (based on reporting date) from the Korea Real Estate Board on the 20th, apartment gifts in Seoul last month reached 2,019 cases, more than double the 933 cases in February. In particular, in Gangnam-gu, where high-priced apartment complexes are concentrated, apartment gifts were recorded at 812 cases, a sharp increase of 6.3 times compared to 129 cases the previous month.
Typically, since comprehensive real estate tax and property tax are levied based on June 1, there is a tendency for gifts to concentrate before that date. However, apartment gifts in Gangnam-gu in March this year were the highest since June 2018 (832 cases), making it a record high. Considering that gifts ranged between 47 and 420 cases over the past 2 years and 8 months, more than 800 gifts is considered exceptional. The proportion of gifts in total apartment transactions in Seoul also reached 24.2%, the highest since the Korea Real Estate Board began its survey.
According to the government, from June, the comprehensive real estate tax for owners of three or more homes (two or more in regulated areas) will be raised from the current 0.6?3.2% to 1.2?6.0%. Capital gains tax surcharges will also increase by 10 percentage points, from 20?30% to higher rates. By distributing apartment ownership through gifts, multi-homeowners can enjoy future capital gains as well as reduce their comprehensive real estate tax burden.
Gifts are also subject to gift tax, acquisition tax, and in the case of burdened gifts, some capital gains tax. Despite this, the sharp increase in gifts in Gangnam-gu suggests that expectations for rising apartment prices remain strong, and owners are willing to bear the tax burden to continue holding apartments through gifting.
This also reflects expectations that the government may partially ease the burden of holding taxes such as the comprehensive real estate tax to regain public favor ahead of next year's presidential election. An industry insider said, "The purpose of raising holding taxes was to bring multi-homeowners' properties to the market to curb house prices, but the increase in gifts means the government's policy has not been effective."
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