[Exclusive] Government Chasing Real Estate 'Price Stability' Ends Up Ruining 'Housing Stability'

Reviewing the '20 Selected Real Estate Damage Cases' Investigated and Compiled by the People Power Party
Forced Gap Investment Overnight... Contract Cancellation, Double Compensation, Eviction Lawsuits 'Chaos'
No Lease Stability Measures Expected This Week
Experts Say "Need to Acknowledge Each Party's Inevitability and Advantageous Timing"

[Image source=Yonhap News]

[Asia Economy Reporters Kim Hyunjung and Jang Sehee] In October last year, Mr. A purchased an apartment on the condition that the registration would be completed by the end of this year. The tenant initially provided a written assurance and verbally promised to vacate after the enactment of the Rental 2 Act, but last month suddenly claimed the exercise of the contract renewal right through a certified letter. If the case proceeds to an eviction lawsuit, Mr. A will find it difficult to receive the temporary one-house two-homes capital gains tax exemption and housing mortgage loans.

Mr. B, who lives in his own home in Mapo, Seoul, and rents an apartment in Yeongjongdo, Incheon, tried to bring his mother-in-law, who travels from the provinces to take care of his children, to Yeongjongdo, but was blocked by the revised rental law. This is because the scope of actual residents who can refuse contract renewal includes only direct ascendants and descendants, excluding the spouse's ascendants and descendants. Mr. B lamented, "Do I have to give my own house to others and have my family live in debt?"

As the government’s solution to stabilize the jeonse market is delayed, side effects of the Rental 2 Act are accumulating, intensifying market confusion. Not only price fluctuations but also variables such as loans, taxes, and tenant opinions have become intricately entangled in the process of residential relocation. Critics say the government is chasing real estate 'price stability' but is actually ruining 'housing stability.'

◆Examining the damage... "Suddenly turned into a gap investor"= According to the 'Top 20 Real Estate Damage Cases' compiled by the People Power Party on the 27th after receiving and investigating cases directly since the amendment of the Rental Act at the end of July, various rental disputes have appeared as of the end of October. The cases of Mr. A and Mr. B mentioned earlier are representative. The number of rental dispute consultations in August and September reached 17,839 (according to the Korea Legal Aid Corporation), a 61% increase compared to the same period last year. This indicates that the opposition party did not exaggerate the recent situation by collecting only special cases.

Looking at the reported damage cases, the sales and jeonse markets are experiencing frequent contract cancellations and double compensation claims, leading to a veritable 'pandemonium' that even extends to eviction lawsuits. Mr. C, who purchased an apartment as a newlywed home in June, planned to move in after the balance payment in April next year, but the tenant is currently unreachable and demanding contract renewal. His first-ever home purchase for newlywed life is on the verge of being forced into a 'gap investment.' Mr. C said, "I inquired with relevant ministries and local governments, but they only mention consultations without providing clear interpretations." Mr. D’s plan to live with his children in a house under his husband’s name was also blocked due to the tenant’s contract renewal refusal condition that all household members must be registered residents. The husband has been living alone in the countryside for several years due to health issues. Mr. D appealed, "Even couples can live apart due to circumstances, but invading personal living spaces is unconstitutional."

[Image source=Yonhap News]

◆Market calls for "extension of capital gains tax exemption period"= One solution proposed by the market is adjusting the capital gains tax exemption benefits. It suggests postponing the deadline for disposing of the existing home (within one year in regulated areas, within three years elsewhere) that grants the one-house two-homes capital gains tax exemption by the length of the contract renewal period. In this case, the usual 'switching' move of adding the price increase of the existing home to the new home’s price would not pose significant problems.

Another controversial issue is the 'voluntary tenant.' This refers to cases where a person owns a home but rents another with a high deposit for various reasons such as investment or children’s education. For example, who deserves more protection of residence rights: Mr. E, who owns a redevelopment property in Gangnam but lives in a jeonse apartment in Mapo with a 1 billion KRW deposit, or Mr. F, who bought the house after 20 years of jeonse living by taking out a loan? This is a matter for discussion.

Regarding this, Professor Sung Tae-yoon of Yonsei University’s Department of Economics said, "There are unavoidable circumstances and advantageous timing in both housing sales and rental contracts," adding, "If all multi-homeowners, including temporary one-house two-homes owners, are antagonized, both sales and monthly rent markets will inevitably be blocked." Professor Kwon Dae-jung of Myongji University’s Department of Real Estate emphasized, "Rental housing plans take 3 to 5 years to supply after announcement," and "The sales market must normalize for tenants to convert to homeowners, which will solve the jeonse shortage."

Meanwhile, the government is expected to find it difficult to present concrete measures to stabilize the jeonse market within this week. A Ministry of Economy and Finance official said, "Jeonse supply involves important property rights issues, so it is actually difficult to find a sharp solution," and "It is unlikely that stabilization measures will be announced this week."