"There are actually a few people around me who swapped homes. But we keep quiet about who exchanged which home. It's someone else's property, after all."
A resident surnamed A, who has lived in Apgujeong-dong, Gangnam District, Seoul, for 40 years, said that "exchange transactions," in which apartments of similar prices are swapped, have been happening recently. After the government decided to reduce capital gains deductions for high-priced homes, homeowners are moving to settle existing capital gains before their tax burden grows and to raise the acquisition price of newly acquired dwellings to the current market level.
ChosunBiz found on the 14th through reporting with Apgujeong-area residents and real estate brokerages that the number of apartment exchange transactions in the area this year is estimated at around 40. The figure aggregates transactions identified by multiple residents and brokerages. The local brokerage industry said that although exchange transaction statistics are compiled by district, some cases are not classified as exchanges in official statistics depending on transaction type, or have not yet been reflected.
The exchange targets are not limited to the same complex. Reports say there are cases of swapping similarly priced Han River–side apartments, including Hyundai Apartment and Hanyang Apartment in Apgujeong and even ACRO River Park in Banpo-dong, Seocho District. In some cases, after transferring ownership, the parties sign lease contracts with each other and continue living on a jeonse basis in their original homes.
A said, "The method of exchanging and then living on jeonse in the original home existed before," and added, "When taxes rose for owners of multiple homes in the past, such cases increased and then declined, but after the latest tax reform plan was announced, some residents began reconsidering it."
The reason landlords pursue an exchange even if it means paying acquisition tax again is that, compared with future capital gains taxes, the tax difference can amount to hundreds of millions of won. Under tax law, an exchange is deemed a disposal of the existing dwellings and an acquisition of new dwellings, so both capital gains tax and acquisition tax must be paid.
Tax accountant Oh Seung-guk of Hana Securities analyzed a case in which a single-home household bought an apartment for 500 million won, held and lived in it for more than 10 years, and its current price is 5 billion won. If an exchange is done now, the capital gains tax, including local income tax, is estimated at about 275 million won. This reflects the taxation method for high-priced single homes and the current maximum 80% special long-term holding deduction.
The base acquisition tax for newly acquiring a 5 billion won dwellings is 150 million won. Adding local education tax and other items, the total capital gains and acquisition-related taxes paid in the exchange process come to 440 million–450 million won.
By contrast, if the government's tax reform plan passes the National Assembly and the home price remains 5 billion won, the capital gains tax when selling the existing dwellings in 2029 is estimated at about 1.12 billion won. That is because starting in 2029, the deduction cap for long-term residence income for a single-home household will be reduced to 1 billion won. The tax burden would be about 670 million–680 million won more than if an exchange is done now.
After an exchange, the acquisition price of the new dwellings is reset based on the transaction price recognized at the time of the exchange. If a home bought for 500 million won is exchanged with a dwellings currently worth 5 billion won, existing capital gains are settled now, and capital gains tax is calculated primarily on gains generated thereafter. Unlike an ordinary sale, immediately securing a dwellings of similar value and maintaining the size of one's real estate asset is also a reason to choose an exchange.
In particular, complexes pushing for reconstruction, such as Hyundai Apartment in Apgujeong, may see stronger exchange demand because many long-term holders have low acquisition prices and large capital gains. Oh said, "An exchange transaction is a method of continuing to hold a dwellings of similar value while settling the gains or losses accrued so far first," adding, "Homeowners who had planned to hold until after reconstruction want to apply the current single-home deduction before the tax reform."
However, an exchange is not always advantageous. The exchange price should be set to reflect differences in price by floor and view. If the contract arbitrarily inflates the price, tax authorities may not recognize it as the acquisition price. There are also incidental costs such as acquisition tax, appraisal fees, and brokerage commissions. If, after the exchange, one lives on jeonse in the original home, the residence period for the newly acquired dwellings may not be met, reducing future deduction benefits.
According to the Korea Real Estate Board (REB), apartment exchange transactions nationwide totaled 305 from January to June this year, the most in three years since 394 in the first half of 2023. However, transactions after this month's announcement of the tax reform plan were not reflected in these statistics.