A supervisory body to crack down on illegal acts such as underreported real estate contracts and evasion of gift tax will launch next year. The government decided to inaugurate an organization to prepare for the launch, the Real Estate Supervision Task Force, on Dec. 3.
The Office for Government Policy Coordination (OPC) held a joint briefing with related ministries at Government Complex Seoul on the 30th to announce the progress and plans for investigations into and probes of illegal real estate acts and unveiled plans to establish a real estate supervisory body.
Kim Yong-su, second vice minister at the Office for Government Policy Coordination (OPC), said, "Illegal acts in real estate not only disrupt the market but are vicious crimes that destroy the economic foundation of working people and youth," adding, "We will detect them to the end with zero tolerance and take action, and we will timely implement necessary measures for market stability and protection of end users through the swift supply of dwellings."
The Ministry of Land, Infrastructure and Transport (MOLIT) on this day announced the results of narrowing down 2,696 cases suspected of abnormal transactions and jeonse fraud from June this year to recently. An abnormal transaction refers to a case where the price is significantly higher than the going rate or where, despite the failure to deposit the balance for a long time after the contract was signed, the reason is not sufficiently explained. Kim Gyu-cheol, MOLIT's housing and land policy director, said, "Representative cases include purchases of high-priced dwellings where, without any equity, most of the funding was borrowed from related parties."
According to MOLIT's investigation, person A purchased a Seoul apartment valued at 3 billion won with 100 million won in parental gifts and 2.9 billion won in loans. Person B, when purchasing an apartment, reported the price 50 million won lower than the actual sale price (underreporting). MOLIT notified all cases that appear to be suspicious transactions, including these two, to related administrative agencies such as the National Tax Service and the Financial Services Commission (FSC). Of these, 35 cases were referred to the Korean National Police Agency for investigation.
The Financial Services Commission (FSC) is focusing on inspections in the area of bank loans. The FSC inspected 5,805 newly issued business loans at seven banks from January to July this year and uncovered 45 cases (loan amount totaling 11.9 billion won) of misuse for nonapproved purposes. Many cases involved using business loans to purchase dwellings.
Of the 45 cases, the Financial Services Commission (FSC) recovered the loan principal in 25 cases (3.8 billion won). For the remaining 20 cases, after borrowers' explanations, it plans to recover the funds by year-end. Borrowers who violated use regulations will be restricted for a certain period from obtaining new business loans at the respective bank. The FSC also plans to have business loans, like household loans, register information on covenant violations with the Korea Credit Information Services so that all financial institutions can use it in credit screening.
The National Tax Service is sequentially conducting a full review of ultra-high-priced dwellings of 3 billion won or more, starting with transactions from last year. As a result, it caught cases including corporate head C, who siphoned off corporate funds to acquire an apartment, and D, who purchased a high-priced apartment after receiving tens of billions of won as a gift from a father. The National Tax Service collected the corporate tax of C's corporation and the gift tax of D.
The Korean National Police Agency is conducting a special crackdown on eight categories of illegal acts, including inflating home prices and jeonse fraud, from the 17th of this month to Mar. 15 next year. So far, it has investigated 146 cases and 268 people and referred 64 to the prosecution. In particular, eight cases (18 people) that MOLIT requested investigation for on suspicion of home price inflation are under consolidated investigation by the Seoul Metropolitan Police Agency's dedicated real estate crime investigation team.
The real estate supervisory body to launch early next year will be a pan-government control tower on illegal acts. It will be under the prime minister's office and is expected to be composed of about 100 people, including investigators. However, it is unlikely to take the form of a ministry-level or agency-level entity that would require a reorganization of the Government Organization Act.
Vice Minister Kim Yong-su said, "When the real estate supervisory body is established, we will proceed through closer consultations among related agencies," adding, "It will also have investigative functions, allowing it to respond to illegal acts."
The government, however, was cautious about additional regulatory measures such as further aligning officially assessed land values with market levels. Deputy Minister Kim Gyu-cheol said, "Officially assessed land values are being kept at about 69% alignment through last year," adding, "This year as well, we will maintain that level while separately reviewing how to proceed with gradual alignment plans going forward."
It also said there are currently no plans for additional lending regulations. Shin Jin-chang, Secretary-General at the Financial Services Commission (FSC), said, "Regarding loan-to-value (LTV) regulations, we adhere to the principle of consideration for working-class end users," adding, "We are not considering additional adjustments in terms of detailed lending regulations."