Metropolitan Area Housing Transaction On-site Inspection and Planned Investigation
397 Suspected Illegal Transactions Detected
Seoul Walking Column - A residential complex in downtown Seoul where apartments and houses coexist. Photo by Jo Yongjun jun21@
#1. Evidence has been found that a social network service (SNS) open chat room in an apartment complex in Seoul prohibited brokerage below a certain price. The Ministry of Land, Infrastructure and Transport suspects price collusion and has requested additional investigations from local governments.
#2. Mr. A recently purchased an apartment in Seoul for 2.1 billion KRW. However, most of the purchase funds came from his mother. He borrowed 1.4 billion KRW from his mother, received a gift of 550 million KRW, and took out a mortgage loan of 350 million KRW to buy the house. The Ministry of Land, Infrastructure and Transport detected that he bought a high-priced apartment entirely with money received from others and loans without any personal funds, suspected illicit gifting, and reported the case to the National Tax Service.
According to the KB Real Estate Weekly KB Apartment Market Trend report, last week Seoul apartment sale prices surged by 0.22% in just one week, with apartment sale and jeonse prices listed on May 5th in Mapo-gu, Seoul. Photo by Jinhyung Kang aymsdream@
Between August and September, the Ministry of Land, Infrastructure and Transport conducted a joint first on-site inspection and planned investigation with related agencies on abnormal housing transactions in the metropolitan area, uncovering 397 suspicious illegal transactions. On the 3rd, they announced plans to take strict measures, including requesting an investigation by the National Police Agency.
The Ministry also identified 160 suspicious illegal transactions through investigations of ‘unregistered transactions’ suspected of false reporting and ‘direct transactions’ potentially involving illicit gifting, which are regularly conducted annually, and notified related agencies such as the National Tax Service. The Ministry plans to conduct a planned investigation by the end of the year to prevent damages caused by the recently increasing suspicious planned real estate transactions and to eradicate speculation by foreigners.
From August 13 to September 27, the Ministry, together with the Financial Services Commission, Financial Supervisory Service, National Tax Service, local governments, Korea Real Estate Board, and Housing and Urban Guarantee Corporation, conducted a first on-site inspection of 45 apartment complexes in the Gangnam 3 districts of Seoul and the areas of Mapo, Yongsan, and Seongdong districts. They are also conducting a detailed planned investigation with the Korea Real Estate Board on abnormal transactions among metropolitan area housing transactions in the first half of this year.
The investigation uncovered 397 transactions suspected of illegal activities such as illicit gifting, misuse of loan funds, and false contract date reporting. If a single transaction is judged to violate multiple laws, it was reported to several related agencies. Suspicious illegal transactions will be reported and investigated by the National Tax Service, Financial Services Commission, Ministry of the Interior and Safety, relevant local governments, and the National Police Agency depending on the violation. Additionally, suspicious transactions with false or improperly prepared funding plans will undergo detailed investigation and be reported to local governments and the National Tax Service.
The joint on-site inspection of abnormal housing transactions in the metropolitan area will be expanded to cover the entire metropolitan area, including the first-generation new towns where prices have recently been rising, and will continue until the end of the year. The planned investigation of this year’s reported transactions will continue until April next year.
More than half of the jeonse prices for Seoul's 'standard apartment size' lease contracts this year have exceeded 600 million won. On the 5th, a real estate office in Seoul displayed jeonse and sale price lists. Photo by Kang Jin-hyung aymsdream@
After analyzing 187,000 nationwide apartment transactions reported in the second half of last year, the Ministry announced that unregistered transactions totaled 518 cases (0.28% of all transactions), a decrease of about 56% compared to the second half of 2022. The reported unregistered transactions investigated this time will be notified to the reporting authorities (city, county, district) for additional investigation and administrative action regarding false reporting or failure to cancel.
For transactions with excessively delayed payment deadlines, which may be abused to inflate housing prices by reporting transactions at record prices and canceling them after a long period, the Ministry plans to establish a separate disclosure method for actual transaction prices in the future.
Meanwhile, the Ministry has launched a special investigation into planned real estate projects that exploit the public by charging excessive profits, causing many victims, and raising land prices, which may hinder public projects.
Considering the characteristics of planned real estate projects that deceive by presenting land that is difficult to develop or has low economic value as developable and repeatedly sell shares in a short period, the investigation will select and conduct investigations on share transactions of land with low development potential, multiple transactions within a specific period, and transactions with large price increases from January 2020 to July 2024 nationwide.
To eradicate speculation by foreigners, the planned investigation of abnormal foreign real estate transactions, conducted annually since 2022, will target real estate transactions up to July 2024, selecting cases with excessive borrowing, multiple area transactions, and short-term holdings. The special investigation of planned real estate and the planned investigation of abnormal foreign real estate transactions will be conducted until the end of the year, with results announced in the first half of next year.
Kim Gyu-cheol, Director of the Housing and Land Office at the Ministry of Land, Infrastructure and Transport, said, “For stability in the real estate market, it is essential to establish transparent transaction order by detecting illegal and unfair acts that disrupt real estate transaction order along with stable housing supply.” He added, “Together with related ministries and local governments, we will conduct additional on-site inspections and planned investigations on abnormal housing transactions in the metropolitan area, and thoroughly review funding plans submitted at the time of transaction reporting to completely block speculative demand.”
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