"Officetel LTV Corrected from 40% to 70%"... Government's 'Fake News' Announcement Also Misleads Opposition [Real Estate AtoZ]

Government Announces Nonexistent 'Officetel Loan Regulation,' Issues Belated Correction
Current Regulations Still Set Non-Residential LTV at 70%
Ministry of Land Clarifies: "New Land Transaction Permission Zones Apply Only to Residential Propert

The government's "10·15 Real Estate Measures" have sparked controversy just two days after their announcement due to confusion over the loan-to-value (LTV) ratio for officetel-backed loans. It turned out that the claim about reducing the LTV for non-residential mortgage loans in designated land transaction permission zones from 70% to 40% was not true. Although the government urgently distributed a "Frequently Asked Questions (FAQ)" document, criticism has grown that the belated clarification only further eroded trust in the policy. On real estate community forums, people voiced their frustration, saying, "What kind of country corrects its policies just two days after announcing them?" and "Now the public has to fact-check government announcements themselves."

Press release on measures to stabilize the housing market. It specifies reducing the loan-to-value ratio for non-residential properties in designated land transaction permission zones to 40%. Ministry of Land, Infrastructure and Transport.

The controversy began at a joint briefing by relevant ministries on October 15. The government announced that, with the designation of new land transaction permission zones, "the LTV for non-residential mortgage loans, such as officetels and commercial properties, will be tightened from 70% to 40%." This information was clearly stated in the press release. Both the Housing Policy Division of the Ministry of Land, Infrastructure and Transport and the Financial Policy Bureau of the Financial Services Commission confirmed this, leading the media to report that "the LTV for officetels across Seoul will be reduced to 40%." Community forums were filled with angry reactions, such as "Is the government telling single-person households to give up?" Song Eon-seok, floor leader of the People Power Party, strongly criticized the measures, stating, "The LTV for officetels, which are a primary housing option for single-person households, has been lowered from 70% to 40%, making only young people and low-income groups scapegoats for real estate policy."

However, this was not true. Under the current banking supervision regulations, the LTV for non-residential mortgage loans remains at 70%, and any change would require a resolution by the Financial Services Commission. In reality, the regulation was not changed, and loans for officetels in newly designated land transaction permission zones remain at 70% as before. In effect, the government announced a regulation that did not exist. In addition, the opposition party criticized a policy that was never actually implemented.

As the situation escalated, the Ministry of Land, Infrastructure and Transport issued an official FAQ on October 17, clarifying, "The newly announced land transaction permission zones only apply to residential properties such as apartments, and do not affect non-residential properties such as officetels and commercial buildings. Therefore, the LTV for non-residential mortgage loans remains at 70%." The new land transaction permission zones apply only to apartments and multi-family housing that includes apartments. Officetels and commercial buildings, which are classified as business facilities, are not subject to the permission zone requirements. As a result, there is no need to obtain land transaction permission when purchasing an officetel.

The ministry also provided a detailed explanation regarding restrictions on the transfer of membership rights within speculative overheating zones. It stated, "In reconstruction projects, the transfer of membership rights is not allowed from the time of association establishment approval until the public announcement of the transfer." However, exceptions are allowed in cases such as single-homeowners who have owned the property for more than 10 years and lived in it for more than 5 years, unavoidable relocation due to illness or job transfer, inheritance, project delays (over 3 years), compulsory auction due to default, land sharing for supply of equity-type housing, and transfers to public redevelopment operators.

The scope of loan regulations was also specified in detail. For general borrowers in newly regulated areas, the LTV will be tightened from 70% to 40%, and the debt-to-income (DTI) ratio will be adjusted from 60% to a range of 40-50%. However, first-time homebuyers and low-income or genuine home seekers will be exempted and can maintain an LTV of 70%. Policy loans such as the Didimdol Loan and Bogeumjari Loan will also continue to have the existing limit of up to 400 million won.

The criteria for the recall of jeonse loans were also clarified. In speculative overheating zones, if a person with a jeonse loan acquires an apartment with a market price exceeding 300 million won, the loan will be recalled at the time of title transfer registration. However, if an existing tenant remains in the property, the recall will be deferred until the end of the lease contract. For pre-sale rights or occupancy rights, the loan will be recalled upon completion and registration or execution of the balance loan, but the maturity of the jeonse loan can be extended until the title transfer is completed.