"Give This Away to Someone Else?" A New Trend Spreads in Gangnam

[The Financial News]
"Why would I sell this? I’d rather just give it to my kids."
As heavier capital gains taxes were confirmed, apartment gifts in Seoul’s Gangnam area have risen rapidly. The number of gifted apartments in the Gangnam 3 Districts, from owners trying to dispose of properties before the higher tax takes effect on May 9, has nearly doubled in a year.
According to the Court Registration Information Plaza on the 9th, there were a total of 901 gifts of multi-unit properties, including apartments, in Seoul last month. That is about 1.8 times higher than a year earlier, when there were 514 such cases.
The increase is particularly pronounced in the Gangnam 3 Districts. Last month, there were 87 gifts in Gangnam District, 62 in Seocho District, and 56 in Songpa District. Compared with the same month last year, Gangnam District rose from 41 to 87 cases, a 2.1-fold increase; Seocho District from 32 to 62, up 1.9 times; and Songpa District from 36 to 56, up 1.6 times. With the reinstatement of heavier capital gains taxes on multiple-home owners scheduled for May 9 and possible changes to property holding taxes being discussed, analysts say owners of high-priced homes clustered in Gangnam are increasingly deciding, "We might as well transfer them to our children."
The total number of property gifts in Seoul previously peaked at 1,054 cases in December last year. However, that spike was largely due to an increase in joint registrations between spouses as residents began moving into Jamsil Raemian I-Park, a large complex supplied in Jamsil-dong for the first time in 17 years. Experts note that many of those cases are difficult to view as substantive gifts.
The trend has shifted somewhat this year. The number of gifts fell back to a normal level of 785 cases in January, but in February, when the heavier tax on multiple-home owners was announced, it climbed again by about 15% from the previous month. In particular, because there were no new move-ins in the Gangnam 3 Districts, observers say it is highly likely that actual gift demand has increased there.
Listings on the market are also piling up quickly. According to the Asil real estate big data platform, as of this day, apartment listings in Gangnam District totaled 9,720, up 16.9% from a month earlier. Seocho District saw a 24.7% increase (from 6,925 to 8,636), while Songpa District jumped 32.5% (from 4,226 to 5,602).
Actual transactions, however, have largely frozen, weighed down by high prices. In February, only 90 apartment deals were completed in Gangnam District, plunging from 642 in the same month last year. Songpa District also fell from 735 to 157 transactions, and Seocho District dropped sharply from 542 to 66.
As transactions dry up, prices are also taking a breather. Data from the Korea Real Estate Board (KREB) show that weekly apartment prices in the broader Gangnam area turned downward in the fourth week of February for the first time in two years, and continued to fall for a second straight week into the first week of March. Prices declined by 0.09% in Songpa District, 0.07% in Gangnam District, and 0.01% in Seocho District.
Yoon Sumin, a real estate research fellow at NongHyup Bank (NH Bank), said, "It is hard to say that gifts or fire sales are overwhelmingly dominant right now, but there is clearly a rising trend," adding, "The higher the property price, the more often we see cases where ownership shares are divided and gifted." Yoon went on, "Some owners who consider gifting end up putting properties on the market at a steep discount when their children cannot afford the gift tax," and predicted, "The direction of the market will become clearer after April."
going@fnnews.com Reporter Choi Ga-young Reporter