A growing number of homeowners, including those with multiple houses, in some of South Korea’s major cities have given houses to family members instead of selling them to avoid hefty holding taxes, data showed Monday.
The number of houses traded among family members in Daegu has more than doubled on-month from 254 in January to 632 in February, according to data compiled by the Korea Appraisal Board, a government agency that evaluates property values.
The figure for Gwangju also increased from 173 in January to 275 in February. Daejeon saw the number jump more than twofold from 74 to 194 in the same period. The three cities are among the areas that have seen apartment prices soaring in recent years. After the government tightened its real estate regulations -- including strict mortgage rules -- in Seoul and surrounding areas late last month, the three cities have drawn keen attention from individual investors as they remain exempt from the tough real estate regulations.
Apartment prices in Daegu and Gwangju in 2018 rose respectively by 3.15 percent and 3.49 percent on average -- the two highest rates in the nation outside Seoul.
The tax authority imposes real estate taxes on June 1 every year, and an increasing number of multiple-home owners sell properties before the date.
Transferring ownership of a home to children can help multiple-home owners reduce taxes especially when the original owners have debts, like mortgage loans or deposits owed to tenants, since the tax office excludes those debts when calculating holding taxes.
“Such property transfer cases among family members will increase by the end of May to reduce taxes, especially in cities where home prices have risen a lot recently,” said Woo Byung-tak, a team leader at Shinhan Bank’s real estate investment advisory unit.
Some market analysts said the increase in property transfers between family members also reflects sluggish demand in the housing market amid the ongoing pandemic.
In Gangnam, Seocho and Songpa, three of the poshest districts in Seoul, a total of 287 properties are estimated to have changed hands in February -- the lowest in a year, according to real estate services platform operator Zigbang.
Regions whose transaction volumes have been on a downward trend include the districts of Mapo, Yongsan, Nowon and Dobong.
“Contracted consumer sentiment due to the novel coronavirus will keep the property market in a wait-and-see mode for a while,” said a Zigbang official.
By Kim Young-won (email@example.com