Home purchases by minors in South Korea rose to 1.8 times last year's level this year, with buyers reporting that more than half of the purchase price came from their own funds. The source of that money, declared at an age when financial independence is rare, has drawn suspicion of improper gifting.
Nationwide, buyers aged 19 and under purchased 66 homes as of the end of August, up from 37 a year earlier, according to data on funding plans filed by minors over the past five years that Rep. Hwang Hee of the Democratic Party of Korea, a member of the National Assembly's Land, Infrastructure and Transport Committee, obtained from the Ministry of Land, Infrastructure and Transport on the 23rd. The total purchase value came to about 23.1 billion won, up 9.5% from 21.1 billion won a year earlier.
Of that amount, 13.1 billion won, or 56.7%, was declared as the buyers' own funds, including bank deposits and proceeds from selling stocks and bonds. That means buyers of homes costing an average of about 350 million won each put up roughly 200 million won of their own money.
The transactions were concentrated in Seoul. Of the 66 purchases, 53, or about 80%, were in Seoul, followed by 11 in Gyeonggi Province and one each in Busan and South Gyeongsang Province. No other region recorded a transaction through the end of August. Own-funds ratios reached 100% in Busan, at 836 million won, and South Gyeongsang Province, at 690 million won, compared with 73.9% in Gyeonggi and 49.4% in Seoul.
Within Seoul, the ratio stood at 100% in Jongno and Geumcheon, which each recorded one purchase, and exceeded 50% in eight districts in total, including Seodaemun at 91.6%, Gwanak at 67.1%, Seongdong at 64.6%, Dongjak at 61.7%, Seongbuk at 60.9% and Yeongdeungpo at 59.0%.
The ratio has climbed recently. Over the roughly six years from 2021 through August of this year, minors' home purchases totaled 340.5 billion won across 1,541 transactions, of which 140.6 billion won, or 41.3%, was declared as their own funds. This year's 56.7% ratio is 15.4 percentage points above the six-year average. The average purchase price per transaction also rose, to about 350 million won this year from about 220 million won over the six-year period.
Average Own Funds of 200 Million Won Reported, Ten Times the Gift Tax Exemption
Under tax law, a minor who receives a gift from a parent, grandparent or other lineal ascendant qualifies for a gift deduction of only up to 20 million won over 10 years. This year's average own-funds figure of about 200 million won is 10 times that limit. If a buyer cannot document the source of acquisition funds, the money can be presumed to be a gift and taxed accordingly under Article 45 of the Inheritance Tax and Gift Tax Act.
Hwang said that when expensive homes are bought in the name of minors or young children who have no capacity for financial independence, there is a very high likelihood of improper gifting disguised as bank deposits or proceeds from stock sales, or of the misuse of corporate funds. He stressed that if the land ministry, the National Tax Service and other relevant agencies identify suspected evasion in funding plans filed by minors, they should take firm action, including referrals to the tax agency.
Of the 66 homes bought by minors through the end of August, more than half the value was declared as the buyers' own money, and most of the purchases were in Seoul. Declaring one's own funds does not in itself indicate wrongdoing, but the question is whether authorities can screen out transactions whose funding sources remain unverified.