Increase in 'Spousal Gifts' for Joint Ownership
Seocho-gu 'The H Bangbae' Sees 35%p Rise in Gift Share One Month After Contract
Seoul's Gift Share Hits 7-Year Low Last Year
In August last year, when housing prices were soaring, the number of apartment gift transfers in Seongbuk-gu, Seoul, suddenly jumped to 267 cases from below 20 cases throughout the previous year. This was due to the contract impact of ‘Prugio Radius Park (Jangwi 6 District)’, which consists of 1,647 households (718 general sale units). This apartment complex set a new record for the highest sale price in the northeastern area of Seoul, with a price of 1.211 billion KRW for an 84㎡ unit. Successful applicants changed ownership to joint spousal names to reduce property tax burdens, leading to an increase in gift transfers between spouses and resulting in this unusual figure.
This kind of tax-saving ‘gift transfer investment’ was mainly observed in apartment complexes in Seoul where high-priced sales occurred. Despite the application of the price ceiling system, Seocho-gu recorded the highest number of gift transfers, followed by Gangnam-gu and Songpa-gu. This indicates that the polarization of housing prices is leading to polarization in gift transfers.
To reduce property tax... many gift transfers between spouses
On August 18 last year, customers are viewing the housing model at the model house of 'The H Bangbae,' a reconstruction complex in Bangbae 5 District, Seocho-gu, Seoul. Photo by Yonhap News
According to the ‘Apartment Transaction Status by Cause’ report from the Korea Real Estate Board on the 8th, the proportion of apartment gift transfers in Seocho-gu, Seoul, reached 55% (427 out of 776 cases) in October last year, marking the highest point of the year (excluding December). This was a sharp increase of 35 percentage points compared to the previous month (20%, 154 out of 778 cases). In November of the same year, it also recorded the second highest rate of 40% (334 out of 835 cases).
The sharp increase in the proportion of apartment gift transfers in Seocho-gu over a short period was influenced by contracts for ‘The H Bangbae (Bangbae 5 District)’ in Bangbae-dong. Successful applicants made gift transfers between spouses at the time of contract to own the apartment under joint spousal names.
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Using joint ownership instead of single ownership can reduce property tax burdens. The H Bangbae started sales in August last year and began contracts with successful applicants from September. Yoon Soo-min, a real estate specialist at NH Nonghyup Bank, analyzed, "Because the sale price of The H Bangbae was high, many successful applicants tried to save taxes through gift transfers between spouses. Since The H Bangbae is a large complex with over 3,000 households, there were many such cases, causing a temporary spike in the figures."
The increase in gift transfers due to large-scale apartment subscriptions was also seen during the contract period for successful applicants of ‘Olympic Park Foreon’ in Dunchon-dong, Gangdong-gu, which has over 10,000 households. The proportion of apartment gift transfers in Gangdong-gu soared from 38% (76 out of 206 cases) in December 2022 to 77% (353 out of 461 cases) in January of the following year when contracts were underway.
Thanks to the ‘The H Bangbae effect,’ Seocho-gu had the highest proportion of apartment gift transfers among the three Gangnam districts (Gangnam, Seocho, Songpa) during the same period. In Gangnam-gu, the proportion remained similar at 8% (63 out of 814 cases) in September last year, 20% (141 out of 705 cases) in October, and 14% (98 out of 676 cases) in November. Songpa-gu showed an increasing trend from 1% (6 out of 435 cases) in September to 17% (57 out of 336 cases) in October and 36% (166 out of 461 cases) in November, but the increase was less than that of Seocho-gu.
Besides gift transfers for joint ownership, some also joined gift transfer investment strategies in anticipation of the change this year in the gift tax base for ultra-high-priced apartments from the publicly announced price to market price. Previously, ultra-high-priced residential real estate with few transactions and no established market price reported gift tax based on the publicly announced price. If the tax base changes to market price, the tax burden is expected to increase.
Lowest in 7 years across Seoul
In the past year (January to November), the proportion of gift transfers among all apartment transaction types in Seoul?including sales, exchanges, gift transfers, and pre-sale rights resale?recorded the lowest level in 7 years. It was 7.5% (6,297 out of 84,011 cases), down 0.4 percentage points from the same period last year (7.9%). This was the lowest figure since 2017 (4.3%).
Experts analyze this as a result of the judgment that apartment prices in Seoul overall have risen as much as they can. Park Won-gap, senior real estate specialist at KB Kookmin Bank, explained, "When people need to dispose of their homes, if they expect prices to rise, they tend to keep them by passing them on to their children. But since they think now is the peak price, they want to sell to gain profits."
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