[Taemin Ryu's Real Estate A to Z] What Changes When 'Adjusted Target Areas and Speculative Overheated Districts' Are Lifted?

[Asia Economy Reporter Tae-min Ryu] The government decided on the 30th of last month to lift the designation of speculative overheated zones and regulated areas in some regions including Daegu, Daejeon, Gyeongnam, and Jeonnam. As expectations rise that the lifting of these zones will expand nationwide, demanders' attention is focusing on the effects of deregulation in these areas.

Once deregulated, these areas are freed from extensive restrictions on loans, taxation, and subscription. In regulated areas, the loan-to-value ratio (LTV) is limited to 50% for properties valued at 900 million KRW or less, and 30% for the portion exceeding 900 million KRW. The debt-to-income ratio (DTI) is also capped at 50%. In speculative overheated zones, the LTV is 40% for properties up to 900 million KRW, 20% for the portion exceeding 900 million KRW, and loans are not available for properties exceeding 1.5 billion KRW, making loan regulations even stricter. When acquiring a house, reporting of funding sources and move-in plans is mandatory.

Tax burdens are also significantly reduced in non-regulated areas. For capital gains tax, owners of two houses in regulated areas face a 20% surcharge, and those with three houses face a 30% surcharge, but in non-regulated areas, only the general tax rate applies without surcharges. Additionally, long-term holding special deductions for multi-homeowners apply in non-regulated areas, allowing up to a 30% deduction on capital gains depending on the holding period.

The disposal period for existing homes by temporary two-homeowners eligible for capital gains tax exemption is extended from one year to three years. The exemption criteria for single-homeowners are also relaxed from '2 years of ownership and 2 years of residence' to '2 years of ownership,' allowing exemption benefits even without moving in.

Acquisition tax surcharges for multi-homeowners are also eased. In regulated areas, the tax rate is 8% for acquiring a second home and 12% for three or more homes. In non-regulated areas, the tax rate for acquiring a second home is reduced to 1-3%, similar to that for a single home, reducing the burden. Furthermore, property tax for two-homeowners decreases from 1.2-6.0% in regulated areas to about half, 0.6-3.0%.

Conditions for first-priority subscription are also relaxed. In regulated areas, first-priority subscription requires ▲a household head with no home or one home ▲subscription to a housing subscription savings account for over 2 years with 24 payments ▲no subscription winning history in the past 5 years. The re-winning restriction period is 10 years in speculative overheated zones and 7 years in regulated areas. Additionally, the resale restriction period for pre-sale rights is drastically reduced from 3 years to 6 months, making it easier to resell after winning.

Restrictions on transferring membership status in redevelopment projects are also lifted. In speculative overheated zones, transfers are prohibited from the time of union establishment approval for reconstruction and from the management disposition plan approval for redevelopment, but there are no restrictions in regulated areas. The 5-year re-winning restriction for housing in redevelopment projects will also be eliminated.