In October last year, 55% of apartment transactions in Seocho-gu, Seoul were found to be gift transactions. This figure is significantly higher than the proportion of gifts (14.4%) in all apartment transactions in Seoul during the same period. As the method of calculating gift tax on ultra-high-priced homes has been strengthened starting this year, analysts say that asset owners have rushed to make gifts as the tax burden is expected to increase.
According to the Korea Real Estate Board’s statistics on apartment transaction causes on the 5th, 1,000 (14.4%) of the 6,926 apartments in Seoul traded in October last year were gift transactions. This proportion of gifts is 1.8 times higher than in October 2023 (7.9%), and is the highest since December 2022 (29.9%).
Among Seoul’s 25 districts, Seocho-gu had the highest proportion of donations. Of the 776 units sold in Seocho-gu in October last year, 427 (55%) were donations. Gwangjin (26.7%), Gangdong (21.2%), Gangnam (20%), and Songpa (17%) had the highest percentage of donations in that order.
This trend continued until November of last year. The proportion of total donations for apartments in Seoul was 13.6%, similar to last October. The proportion of donations was high mainly along the Han River, where ultra-expensive apartments are concentrated, such as Seocho (40%), Songpa (36%), Gangdong (24%), Gangnam (14.5%), and Seongdong (22.2%).
The reason the proportion of gifts has increased is because the method of calculating gift tax has been strengthened starting this year. Gift tax is calculated based on the market price of real estate. However, in cases where it is difficult to determine the market price, such as very expensive houses that are rarely traded, gift tax is levied based on the publicly announced price.
The problem is that the publicly announced prices of ultra-high-priced homes are significantly lower than the market price, resulting in a ‘reversal phenomenon’ in which the market price is more expensive but less gift tax is paid. According to the National Tax Service’s actual simulation, the market price of the exclusive area of 223.6㎡ of ‘Tower Palace’ in Gangnam-gu, Seoul is estimated to be 7 billion won, but the official price is only 3.7 billion won. The gift tax imposed based on the publicly announced price is 1.37 billion won. This means that 300 million won less will be paid in gift tax (1.67 billion won) for the 84㎡ exclusive area of ‘Raemian Firstige’ in Seocho-gu, Seoul, which has a market value of 4.3 billion won.
In order to solve this problem, the National Tax Service has decided to impose gift tax on ultra-expensive homes starting this year after an appraisal. Since the appraised value is 80-90% of the market price, the gift tax will be increased compared to when levied based on the publicly announced price.
The slowdown in house price growth since August of last year is also cited as a reason for the increase in gifts. Since gift tax is based on the price at the time of gift, making a gift when house prices are weak is advantageous in reducing the tax burden. Shinhan Premier Pathfinder expert Woo Byeong-tak explained, “House prices are weak, and there is a temporary surge in demand to lower the gift tax burden ahead of this year’s appraisal tax.”
Reporter Kim Ho-kyung [email protected]
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