Better to Gift Early Than Pay Property Taxes... Surge in Gifts to Minors and People in Their 20s [Real Estate AtoZ]

42% Increase in Real Estate Gifts to Minors in Seoul from January to September
High Proportion in Expensive Areas Such as the Three Gangnam Districts and Yongsan
Homeowners Gifting Properties in Advance Amid Potential Tax Reforms
"Gift Tran

Apartments in the Jamsil area, Songpa-gu, Seoul

This year, as housing prices have risen and discussions about tax reforms such as property holding taxes have intensified, the number of people transferring property to their children has increased significantly. In particular, the number of minors and people in their 20s who received real estate as a gift in Seoul surged by more than 40% in just one year.

According to the Court Registration Information Plaza on October 22, the number of minors aged 0 to 18 in Seoul who applied for ownership transfer registration of collective buildings (such as officetels, apartments, row houses, and multi-family housing) due to gifts between January and September this year was 187. This represents a 42.7% increase compared to 131 during the same period last year.

Not only minors, but also young adults aged 19 to 29 have increasingly inherited homes. From January to September this year, 716 people in this age group received property as a gift, up 48.5% from 482 during the same period last year. The growth rates for minors and those aged 19 to 29 were 18.9 and 24.7 percentage points higher, respectively, than the overall increase of 23.8% across all age groups receiving gifts.

Even within Seoul, gifts to minors were more prevalent in areas with higher real estate prices. From January to September this year, the number of minors receiving property in the four districts of Gangnam 3-gu and Yongsan-gu, considered Seoul's most affluent areas, was 84. Given that the total number of minors receiving property across all 25 districts in Seoul was 187, these four districts accounted for a significant 45% of the total.

It appears that homeowners are gifting properties to their children to prepare for potential increases in property holding taxes. Although President Lee Jaemyung pledged during the presidential election not to use tax policy as a means to control the real estate market, concerns have persisted that tax burdens on high-priced homes or multiple homeowners could be strengthened as housing prices rise.

As discussions about tax reform, especially the strengthening of property holding taxes, have become more active, multiple homeowners are facing increasing concerns. From their perspective, gifting properties to reduce the number of homes they own is necessary to avoid punitive taxes on multiple properties. As a result, it is advantageous to transfer properties to their children, even if they are minors. Furthermore, if housing prices are expected to rise, gifting is more beneficial than inheritance, and considering progressive tax rates, it is better to gift properties as early as possible.

During the previous Moon Jae-in administration, the sharp rise in real estate prices and property holding tax rates also led to a significant increase in property gifting. The number of residential and building gifts steadily increased from 33,043 cases (5.3637 trillion won) in 2017, surpassing 40,000 cases the following year. In 2019 and 2020, there were 43,066 cases (8.0167 trillion won) and 46,546 cases (9.8729 trillion won), respectively. In 2021, both the number and value of gifts surged to 84,665 cases, amounting to 24.2204 trillion won. As the tax burden grew, more people chose to pay gift taxes and transfer properties to their children rather than pay annual property taxes.

At that time, property gifting among young adults in their 20s and 30s was particularly notable. In 2017, there were 2,985 cases (515.1 billion won) of gifts to people in their 20s, which increased to 14,389 cases (4.4169 trillion won) by 2021. For those in their 30s, the number rose from 6,871 cases (1.3755 trillion won) to 20,913 cases (7.5178 trillion won). Over five years, the number of gifts received by people in their 20s and 30s increased by 3.5 times, and the total value rose by 6.3 times.

Recently, the likelihood of an increase in property holding taxes has grown even further. In July, Jin Sungjoon, then Policy Committee Chair of the Democratic Party of Korea, stated that additional tax measures could be considered if instability in the real estate market continued. In August, Kim Yongbeom, Policy Chief at the Presidential Office, remarked, "It is a mistake to think the government will not use taxes." On October 16 (local time), Deputy Prime Minister and Minister of Economy and Finance Koo Yooncheol also suggested the possibility of a comprehensive restructuring of the tax system, including strengthening property holding taxes, if the upward trend in housing prices in the Seoul metropolitan area could not be contained.

Yoon Sumin, a real estate specialist at NH Nonghyup Bank, said, "With the burden of property holding taxes and the emphasis on punitive taxes for multiple homeowners, more people are choosing to gift their properties. If there is a clear direction toward higher property holding taxes, gifting will naturally accelerate." She added, "If you gift property quickly when its value is low, it benefits your children if prices rise later. Many people are likely considering gifting now, assuming that housing prices will continue to increase."