[October 15 Measures] Tighter Controls Amid Supply Uncertainty... Real Estate Supervisory Agency Established Under Prime Minister's Office [Real Estate AtoZ]

Ultra-Strong Three-Part Regulatory Package Envelops All of Seoul
"Sharp Decline in Jeonse Listings, Accelerated Shift to Monthly Rentals"
Pan-Governmental Cooperation System Established to Crack Down on Illegal Activities

The government has introduced the October 15 Housing Market Stabilization Measures as a follow-up to the September 7 Housing Supply Policy, but market reactions are mixed. While the strengthened regulations are expected to curb short-term speculative demand, critics point out that the measures lack concrete plans for expanding actual supply or providing tax relief.

'Measures Relying on Trust'

The government announced that, through this policy, it would suppress speculative demand by expanding regional regulations and tightening loan restrictions. However, the supply policy remains a long-term plan. Kim Gyucheol, Director General for Housing and Land at the Ministry of Land, Infrastructure and Transport, stated during a joint briefing at the Government Complex Seoul on October 15, "If we can instill trust that housing will be supplied in five years, two years, or even one year, it will contribute to market stability." The implication is that the impact of supply depends more on confidence in the scheduled timeline than on the actual move-in date. While regulations may suppress transactions in the short term, the effect of increased supply ultimately relies on this 'future trust.'

In the market, there are concerns about whether stability can be achieved based solely on trust when the timing of construction and occupancy remains uncertain. Lee Eunhyeong, a research fellow at the Korea Institute of Construction Policy, said, "Regulations can suppress transactions and have a certain effect in the short term. However, if the market is artificially restrained, it inevitably leads to the fundamental question: 'How long can this situation be sustained?'"

With the entire city of Seoul designated as a Land Transaction Permission Zone, a Speculative Overheating District, and an Adjustment Target Area, the so-called 'three-pronged ultra-strong regulatory package' is now in effect. Experts warn that the combination of tighter loan regulations and mandatory occupancy requirements could sharply reduce the supply of jeonse rental properties and accelerate the shift to monthly rentals. Ham Youngjin, Head of Real Estate Research Lab at Woori Bank, commented, "The trend toward monthly rentals and the decrease in available jeonse properties in the rental market are expected to persist for the time being. Restrictions on jeonse loans could continue to put upward pressure on jeonse prices." Yoon Sumin, Real Estate Specialist at NH Nonghyup Bank, also predicted, "A sharp decline in jeonse properties is expected for the time being, leading to a shortage in the jeonse market. The market will likely be dominated by semi-jeonse arrangements."

"Tracking Market Manipulation to the End"... All-Out Mobilization by the Ministry of Land, National Tax Service, Police, and Financial Services Commission

As criticism mounts that these regulations are increasing the burden on genuine homebuyers, the government has shifted its focus to cracking down on illegal transactions under the banner of 'establishing order in real estate transactions.' A pan-governmental task force, led by the Ministry of Land, Infrastructure and Transport and including the National Tax Service, Financial Services Commission, and National Police Agency, will intensively monitor illegal activities through the end of the year.

As a preliminary step to the measures announced today, the Ministry of Land signed a 'Financial business agreement (MOU) for establishing order in real estate transactions' with the National Tax Service on October 1. Under this agreement, the National Tax Service will have real-time access to documents collected by the Ministry of Land, such as funding plans and evidence of deposits and loans. This marks the first time that transaction information and tax data, which were previously managed separately, are being linked. The Ministry of Land is also considering the creation of a special judicial police force for real estate to exercise direct investigative authority. The scope of investigations is being expanded to include violations of the Real Estate Transaction Reporting Act, the Licensed Real Estate Agents Act, and the Housing Act (such as fraudulent subscriptions and illegal resale), with related legal amendments underway.

The National Tax Service will conduct a comprehensive review of ultra-high-priced residences (over 3 billion KRW) along the Han River and will scrutinize transactions with unclear sources of funds, such as those involving foreigners or minors, using stricter standards. Not only ordinary sales but also tax evasion through disguised gifts will be targeted. Next month, the National Tax Service will establish a 'Real Estate Tax Evasion Reporting Center' and operate information-gathering teams in seven regional offices to collect data on tax evasion in overheated areas in real time. Financial authorities have also launched a full-scale investigation to prevent cases where business loans are diverted for real estate purchases.

The Financial Services Commission and the Financial Supervisory Service have been conducting on-site inspections of 15 financial institutions since July, focusing on identifying cases of circumventing loan regulations. The National Police Agency will also begin a special crackdown on real estate crimes this month. A task force led by the Director of the National Investigation Headquarters will mobilize 841 investigators nationwide to focus on price manipulation, fraudulent subscriptions, and corruption in reconstruction projects.

The government does not intend to end this crackdown as a short-term measure but plans to transition to a permanent supervisory system by next year. In November, the Office for Government Policy Coordination will operate a 'Real Estate Supervision Task Force,' and next year, a 'Real Estate Illegal Activities Supervisory Agency' will be established under its jurisdiction. The Ministry of Land will complete its planned investigation into price manipulation by the end of the year and institutionalize the sharing of funding plan information with the National Tax Service.