[10.15 Measures] Tighter Controls Amid Supply Uncertainty... New Real Estate Supervisory Agency to Be 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 Plan, but market reactions remain divided. While the strengthened regulations are expected to curb short-term speculative demand, critics point out that the measures lack substantial supply expansion or supplementary tax policies.

'Measures Relying on Trust'

The government announced that it aims to suppress speculative demand by expanding regional regulations and tightening lending restrictions through these new measures. However, the supply policies remain focused on long-term plans. On October 15, Kim Kyucheol, Director General for Housing and Land at the Ministry of Land, Infrastructure and Transport, stated at a joint briefing at the Government Complex Seoul, "If we can instill trust that new supply will be available in five years, two years, or even one year, it will contribute to market stabilization." The implication is that the effect of increased supply depends more on confidence in the scheduled timeline than on the actual move-in date. While regulations can temporarily suppress transactions, the actual impact of supply ultimately relies on this 'trust in the future.'

Market participants are questioning whether trust alone can stabilize the market when the timing of construction and occupancy remains uncertain. Lee Eunhyeong, a research fellow at the Korea Institute of Construction Policy, commented, "Regulations can suppress transactions and have a certain effect in the short term. However, if the market is artificially restrained, it inevitably raises the fundamental question of 'How long can this situation be maintained?'"

With all of Seoul designated as a land transaction permit zone, and all 25 districts classified as regulated areas and speculative zones, the entire capital region is now subject to a 'three-pronged set of ultra-strict regulations.' Experts warn that the combination of tighter lending restrictions and mandatory occupancy requirements could lead to a sharp decrease in the supply of jeonse (lump-sum deposit rental) properties and accelerate the shift to monthly rentals. Ham Youngjin, Head of Real Estate Research at Woori Bank, said, "The trend toward monthly rentals in the lease market and the decrease in jeonse properties are expected to persist for the time being. The continued pressure on jeonse prices may also result from stricter regulations on jeonse loans." Yoon Sumin, a real estate specialist at NH Nonghyup Bank, also predicted, "There will likely be a severe shortage of jeonse properties for some time, leading to a market dominated by semi-jeonse arrangements."

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

As criticism grows that these regulations increase 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.' Led by the Ministry of Land, Infrastructure and Transport, an inter-agency task force 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, including funding plans and bank deposit and loan certificates. This marks the first time that transaction information and tax data, which were previously managed separately, have been linked. The Ministry of Land is also considering establishing a special judicial police unit 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, Certified Real Estate Agents Act, and Housing Act (such as fraudulent applications and illegal resale), and related legislative amendments are underway.

The National Tax Service will conduct a comprehensive review of ultra-high-priced homes (over 3 billion KRW) along the Han River and will strengthen scrutiny of transactions with unclear funding sources, such as those involving foreigners or minors. Not only simple 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 collection teams at seven regional offices to gather real-time data on tax evasion in overheated areas. 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 cases of regulatory circumvention related to loans. The National Police Agency, starting this month, will also launch a 'special crackdown on real estate crimes.' A task force led by the head of the National Investigation Headquarters will deploy 841 investigators nationwide to focus on price manipulation, fraudulent applications, and corruption in redevelopment projects.

The government plans to transition from these short-term crackdowns 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 Activity Supervisory Agency' will be established under its jurisdiction. The Ministry of Land aims to 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.