In the fourth quarter of last year, it was found that the gifting of apartments in the Gangnam area of Seoul surged. With the recent expansion of property assessment taxation on gift tax, and a slowdown in apartment price increases since September last year, the demand for gifting appears to have increased.
On the 5th, the Korea Real Estate Board analyzed statistics on apartment transactions by reason and found that in October and November last year, gifting accounted for 14.4% and 13.6% of all apartment transactions in Seoul, respectively.
This is the highest level since 29.9% on December 2022. Additionally, it increased significantly from 4.9% in September, and compared to 7.9% and 7.2% in October and November of the previous year, respectively. The national average gifting proportion for apartments in October and November last year was only 5.8% and 5.5%, respectively.
The increase was particularly pronounced in the Gangnam area. In Seocho District, the gifting proportion reached 55.0% in October last year, with 427 of the 776 reported transactions being gifting transactions. In November, 40.0% (334 cases) of the total 835 transactions were gifts as well. In Gangnam District, the gifting proportion was 7.7% in September, but increased to 20.0% and 14.5% in October and November, respectively. In Songpa District, the gifting proportion, which was only 1.4% in September, skyrocketed to 17.0% in October and 36.0% in November.
In Gangdong District, the gifting proportions were high at 21.2% and 24.0% in October and November, respectively, while Seongdong District, known for its high-value apartments, saw an increase in the gifting proportion to 22.2% in November. This contrasts with the low gifting proportions in Nowon District, Dobong District, and Gangbuk District, which remained around 2% to 5% in October and November.
The gifting proportion of apartments in Seoul remained high during the period from 2020 to 2022, when the property tax burden surged, but noticeably decreased starting in January 2023. This was due to the government's change in the tax standards for gift acquisition tax from the previously applied standard value (published price) to the market value recognized amount (transaction cases, appraisal amounts, auction, and public sales amounts), which increased the burden of gift acquisition tax. Additionally, the Yoon Suk-yeol administration has reduced the property tax burden.
The increase in gifting during the fourth quarter of last year is attributed to the National Tax Service's decision to expand the assessment method for gift tax on high-end residential real estate. Generally, inherited or gifted property is valued at market price, but if determining the market price is challenging, supplementary assessment methods, such as published prices and standard prices, are permitted.
As a result, it has been noted that many high-end apartments and luxury single-family homes in Seoul report gift tax based on published prices, given that actual transactions are few and finding comparable transactions is difficult.
Therefore, concerns have been raised that a reverse phenomenon may occur, where high-end apartments have lower gift taxes than mid-sized apartments. It is also analyzed that the increase in gifting transactions was influenced by a decrease in transaction volume due to tightened lending regulations since September last year and an increase in complexes with falling actual transaction prices.
According to the Seoul Real Estate Information Plaza, the volume of apartment transactions in Seoul, which had increased to 9,216 cases in July last year, dropped to 3,148 cases in September, and remained at 3,782 cases and 3,296 cases in October and November, respectively. In some municipalities, the gifting increased due to changes in names of winners to joint names of couples for newly built apartments or the adjustment of equity for '1+1' cooperative members in reconstruction complexes.