Multi-Homeowners Taxed Heavily... Record High Apartment and Non-Apartment Gifts

[Asia Economy Reporter Kim Min-young] The proportion of apartment gifts this year has reached an all-time high as expectations of rising housing prices and the desire to reduce tax burdens coincide. Not only apartments but also gifts of general housing such as villas and detached houses showed record-high levels. This appears to be due to the overlapping burden of capital gains tax and comprehensive real estate tax on homeowners and the expectation of rising house prices.

According to the Korea Real Estate Board's apartment transaction status (based on the reporting date) on the 9th, the total number of apartment gifts nationwide from the beginning of this year to August was 58,298 cases. This corresponds to 6.8% of the total transaction volume of 853,432 cases during the period, including sales, judgments, exchanges, pre-sale rights transfers, and other ownership transfers including gifts. In terms of the proportion of gifts alone, it is the highest for the January to August period since related statistics began to be compiled in 2006.

Non-apartment gift activity is also active. According to the Korea Real Estate Board, the number of non-apartment gifts nationwide until the end of August this year was 41,041 cases. This is also the highest since 2013 for the same period. This accounts for 13.1% of the total transactions (312,392 cases) including sales, judgments, exchanges, gifts, and pre-sale rights transfers. Compared to 37,715 cases in the same period last year, it increased by 8.8%.

The proportion of gifts has also increased. When the Real Estate Board began compiling sales statistics for villas and detached/multi-family houses in 2013, the proportion of gifts in total housing transactions was only 9.4%. However, this proportion rose to 11.7% in 2018, 13.2% in 2019, and 13.6% in 2020, showing a continuous upward trend.

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 is 10-50%, which is lower than the capital gains tax rate of 16-75%. The expectation that house prices will rise further is also a background factor for the increase in gifts.

It is expected that the apartment gifting trend will continue due to the strengthening of 종부세 and 양도세. From this year, the highest 종부세 rate for multi-homeowners has increased from 3.2% to 6.0%, and the highest basic capital gains tax rate has risen from 42.0% to 45.0%, increasing the tax burden further.