President Lee Steps Up Pressure on Non-Resident Single-Home Owners
June 27 Measures Blocked New Gap Investments
Regulations Now Expanding to Existing Gap Investors
Following last year’s June 27 measures, which effectively blocked new gap investments, the financial authorities are now strengthening regulations on existing non-resident single-home gap investors. Their plan is to expand oversight to include loans related to “speculative non-resident single-home owners,” who purchased properties using jeonse (long-term lease) deposits, in addition to loans for certain multi-home owners that had previously fallen into regulatory blind spots.
On the 26th of last month, densely packed apartment complexes could be seen throughout the city from the Namsan Observatory in Seoul. Photo by Yonhap News Agency
On March 2, an official from the financial authorities stated, “We are reviewing regulations on speculative non-resident single-home owners to stabilize the real estate market,” and added, “Although new gap investments were blocked by the June 27 measures, there were no separate actions taken for existing gap investors, so we are considering ways to improve the system.”
Previously, the Financial Services Commission largely blocked new gap investments with the June 27 measures. Homebuyers in the Seoul metropolitan area and other regulated districts who took out mortgage loans were required to move in within six months, and jeonse loans with ownership transfer conditions were banned to prevent buyers from using tenants’ jeonse deposits to pay the purchase price. Subsequently, the October 15 measures imposed a two-year actual residency requirement on homebuyers throughout Seoul, which is considered to have effectively shut down new gap investments.
However, gap investors who had already purchased properties using jeonse deposits before the June 27 measures had been excluded from direct regulation. The financial authorities are now reviewing additional management plans, aiming to make it disadvantageous for these investors to hold property without residing in it.
This move is seen as a follow-up to President Lee Jaemyung’s recent announcement that he would tighten regulations on non-resident single-home owners, following those on multi-home owners. On February 26, President Lee stated via social media platform X (formerly Twitter), “We will use every policy tool available to create an environment where it is more advantageous to sell, rather than hold, a home used for investment or speculation rather than residence.” He underscored his commitment to stronger regulations by listing his apartment in Bundang, Seongnam, Gyeonggi Province, which he had owned for 28 years, for sale.
The financial authorities also view gap investing as one of the factors driving up housing prices. Their assessment is that using jeonse deposits or loans as leverage to buy homes led to a chain migration toward higher-value areas, thereby increasing upward pressure on prices. Accordingly, while protecting purchases for actual residence, their policy is to impose greater burdens on investment or speculative property holdings, even for single-home owners.
In the market, various predictions are being made regarding potential financial regulations on non-resident single-home owners. One financial sector official said, “There are discussions about strengthening the review process at the time of maturity extension for existing jeonse loans on homes owned by non-resident single-home owners. However, considering the impact on the jeonse market, a phased approach focusing on high-priced homes or regulated districts is also possible.” There are also expectations that oversight could be tightened on situations where non-resident single-home owners use jeonse loans to live in another property.
However, there are concerns that if blanket regulations are applied based solely on actual residency, people who have had to move due to unavoidable reasons such as job relocation, children’s education, or caring for parents could be adversely affected.
Additionally, the financial authorities are also reviewing plans to restrict maturity extensions of loans for existing multi-home owners. In addition to loans for residential rental business operators who own apartments in regulated areas such as Seoul and the metropolitan area, they are reportedly considering restricting extensions for loans to non-residential rental business operators who own commercial properties or offices when they mature.
On March 3, the Financial Services Commission plans to convene the financial sector under the leadership of Vice Chairman Kwon Daeyoung to discuss loan regulation measures aimed at normalizing the real estate market. Strengthening loan regulations not only on multi-home owners but also on non-resident single-home owners is expected to be on the agenda.
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