Half of the real estate transactions in Seoul this year that are suspected of being illegal were related to gifts. As home prices trend upward and real estate gifting increases, transactions suspected of "backdoor gifting" appear to have risen alongside. With talk that the government may even pull out a KARD to overhaul holding taxes, the number of such crafty gifting cases caught in future real estate gift transactions is expected to grow.
According to the "status of reported-content investigations" that the Korea Real Estate Board submitted on the 21st to the office of People Power Party Rep. Kim Jong-yang of the Land Infrastructure and Transport Committee at the National Assembly, a review of 4,760 real estate transactions in Seoul from January through August this year found that 2,779 were classified as suspected transactions. Of those, 1,530 cases were deemed likely illegal gifts and were referred to the National Tax Service for investigation, accounting for 55% of all suspected transactions.
As home prices have continued to rise this year and gift-type transactions have increased, the number of transactions suspected as "crafty gifts" that were caught has also grown. From January to September this year, the number of gifts of collective buildings such as apartments, multiplexes, and row houses nationwide was 26,436, up 4.1% from the same period a year earlier. This is the largest in three years since 2022 (34,829 cases).
In particular, real estate gifting surged around Seoul. Through September this year, the number of gifts in Seoul was 5,883, up 19.8% from a year earlier. Districts with high-priced dwellings—Gangnam (507), Songpa (395), Seocho (378), and Yongsan (196)—accounted for a large share.
Typically, when expectations grow that apartment prices will rise, early gifting increases. The aim is to complete gifts between related parties such as parents and children before home prices climb further to reduce tax burdens.
In real estate gift transactions, tax saving is often pursued through below-market transfers and burdened gifts. Under current law, real estate transactions among family members are recognized as normal transactions even if the sale price is up to 30% lower than the actual transaction price, within a limit of 300 million won. "Burdened gifts," in which debts such as jeonse deposits or loans are transferred simultaneously with the gift, are also allowed. When using a burdened gift, the transferred debt is excluded from the gift tax base, yielding tax savings.
In gift transactions, cases suspected of illegality include reporting at prices far below market value, disguising a sale transaction, or below-market transfers—methods of irregular gifting to children. When a transaction is reported as a burdened gift, there are cases where the child who received the dwellings as a gift does not actually repay the collateral loan and jeonse deposit, or even if the debt is repaid, the child receives separate living-expense support from the parents.
However, an official at the Korea Real Estate Board (KREB) said, "1,530 cases (55%) refers to the total number referred to the National Tax Service, and it includes types unrelated to gifting in addition to transactions suspected of 'illegal gifting,'" adding, "It is difficult to conclude that suspected illegal gifting directly means parents gifted dwellings to their children."
Such suspected illegal real estate gift transactions appear likely to increase further. As the government leaves open the possibility of tax reforms related to real estate, including a holding tax hike next year, demand to complete gifting before taxes rise is expected to grow.
The government's plan to toughen crackdowns on illegal real estate transactions is also raising the likelihood of catching crafty gifts. The government will establish a real estate oversight body under the prime minister to continuously monitor illegal transactions and attempts to jack up home prices in the real estate market. This oversight body will be launched next month as the real estate oversight task force. The National Tax Service also plans to set up a real estate tax evasion reporting center and dramatically expand both the number and scope of investigations into the sources of funds for real estate transactions.