Viapateu Unlocked to Secure Jeonse and Monthly Rent... Introduction of Sale-Conversion Type Purchase Lease [8·8 Supply Plan]

Supply of 110,000+ New Purchase Rental Units in the Seoul Metropolitan Area
50,000 Units Eligible for Sale Conversion After 6 Years
Tax and Subscription Support for Non-Apartment Developers and Buyers

The government is taking steps to normalize the supply and demand of non-apartment housing such as villas, whose preference has declined due to the aftermath of jeonse fraud. By next year, more than 110,000 public newly built purchase rental housing units will be supplied in the metropolitan area, and about 50,000 of these units with good locations and structures will allow tenants to purchase them after residing for at least six years.

On the 8th at 2 p.m., the Ministry of Land, Infrastructure and Transport announced the "Plan to Expand Housing Supply for National Housing Stability" at the 8th Real Estate Ministers' Meeting held at the Government Seoul Office. With this plan, a total of 427,000+α housing units will be supplied in the metropolitan area over the next six years, aiming to provide the public with confidence in stable housing supply.

Excess Non-Apartment Supply... Newly Built Purchase Rentals in the Metropolitan Area as a Substitute

First, including Korea Land and Housing Corporation (LH)'s Dundeun Jeonse, 110,000+α newly built purchase rental units will be intensively supplied in the metropolitan area. Especially in Seoul, unlimited purchases will be pursued until the non-apartment supply situation normalizes.

To this end, LH will establish a dedicated organization responsible for newly built purchase rentals in the metropolitan area and shorten the contract signing period from the existing seven months to four months. As of the end of July this year, the number of newly built purchase rental applications received by LH was reported to be 77,000 units.

To strengthen the supply base, private sector participation will also be encouraged. According to the "Three-Set Support Package for Activating Newly Built Purchases," if a private corporation acquires an old house for demolition purposes to supply public newly built purchases, it will be exempt from the 12% acquisition tax surcharge even if a "quasi-housing" is built after demolition. Currently, tax benefits are only provided when a house is constructed after demolition.

Also, if they subscribe to the Housing and Urban Guarantee Corporation (HUG)'s special guarantee for newly built purchase rental project financing (PF), they can receive low-interest loans from first-tier financial institutions up to 90% of the total project cost. A one-stop support system will be established, linking purchase commitments (LH), special guarantees (HUG), and designated dedicated banks.

The Ministry of Land, Infrastructure and Transport said, "Operators who mainly receive loans from second-tier financial institutions will be able to secure funds more stably from first-tier financial institutions," and added, "Considering the rise in construction costs, we will also promote the realization of government support unit prices and fund support so that high-quality purchase rentals can be constructed."

Purchase Rentals Convertible to Sale after 6 Years of Residence... Additional Rental Residence Guaranteed

About 50,000 units of newly built purchase rentals convertible to sale will be supplied to middle-income homebuyers without housing. LH will purchase mainly medium-sized units including apartments, considering preferences, and provide low-interest loans from the Housing and Urban Fund at move-in and sale conversion.

Detailed move-in criteria will be separately prepared according to jeonse and monthly rent types, and sale conversion is possible after six years from the initial lease start date. The requirements follow the New:Home selection type: 130% of the previous year's average monthly urban worker income (200% for dual-income households), assets of 362 million KRW, etc. If the tenant does not wish to convert to sale, the jeonse type guarantees an additional two years (total eight years), and the monthly rent type guarantees an additional four years (total ten years) of rental residence.

The sale price will be half of the sum of the appraised values at move-in and sale. The Ministry said, "We will supply at least 50,000 units as sale-convertible types, including 21,000+α newly built units purchased without limit and some types of Dundeun Jeonse and newlywed types totaling 29,000+α units."

Additionally, a new type will be introduced where HUG purchases houses subject to subrogation repayment with a repurchase condition and rents them out. Separate from the existing Dundeun Jeonse where HUG acquires auctioned houses, a total of 6,000 units (tentative) will be supplied by next year. Rent will be set at about 90% of surrounding jeonse prices, similar to existing Dundeun Jeonse, and tenants can reside for up to eight years. HUG will defer repayment of the remaining debt of the previous owner until the end of the lease and allow repurchase after the lease ends if desired.

A residential area densely packed with apartments, multi-family houses, and villas in Dongseon-dong and Donam-dong, Seongbuk-gu, Seoul / Photo by Yonhap News

Introduction of 6-Year Short-Term Registered Rentals... Expansion of Non-Apartment Scope for Subscription

The Ministry of Land, Infrastructure and Transport has also prepared tax support measures for small-scale construction businesses and registered rental operators. If a housing construction seller purchases a house, demolishes it within one year, rebuilds within three years, and sells within five years, acquisition tax will not be surcharged but taxed at the general rate (1-3%). Previously, construction and sale had to be completed within three years, but the requirements have been relaxed.

For registered rental operators, a 6-year short-term registered rental will be introduced, allowing business with only one unit. Only small houses excluding apartments are eligible. In other words, a single homeowner who purchases a small house and registers it as a 6-year short-term rental can receive the one-household one-home special case. Along with this, the sunset date for acquisition tax and property tax reductions for registered rental housing operators will be extended by three years from the end of this year to December 2027. The sunset for the 70% long-term holding special deduction on capital gains tax for construction-type registered rental housing will also be delayed by three years. Rental dormitories will be newly included in the registered rental category.

Furthermore, the acquisition tax reduction limit for first-time small house buyers will be expanded from 2 million KRW to 3 million KRW. The reduction will be extended for two more years after next year. Here, small houses refer to multi-family, row houses, and urban lifestyle housing with exclusive areas of 60㎡ or less and acquisition prices of 300 million KRW (600 million KRW in the metropolitan area) or less. The scope of non-apartments recognized as no-homeowners to prevent disadvantages in subscription will also be expanded to exclusive areas of 85㎡ or less and official prices of 500 million KRW in the metropolitan area and 300 million KRW in other regions.