In existing land transaction permit zones such as Mok-dong and Yeouido in Seoul, differing responses among ministries over whether to apply regulations to real estate transactions made right before the Oct. 15 measures are adding to market confusion. As these areas were designated as speculative overheating districts, stronger loan regulations than before and restrictions on the transfer of association member status now apply, and authorities are being asked to interpret whether the point of application is the real estate contract date or the land transaction permit application date.
The Financial Services Commission said it would apply the previous loan regulations in existing land transaction permit zones even if a contract had not been signed, as long as a purchase agreement was made and a land transaction permit was applied for with the local government. However, the Ministry of Land, Infrastructure and Transport has not issued an interpretation on whether the previous regulations apply, heightening buyers' anxiety.
According to the government on the 17th, the Ministry of Land is reviewing whether previous regulations apply to real estate transactions made before the announcement of the Oct. 15 measures in Mok-dong, Yeouido, and other areas that were existing land transaction permit zones but non-regulated areas.
Mok-dong, Yeouido and other areas had already been designated as land transaction permit zones before the Oct. 15 measures were announced. Under the new real estate measures, they were also designated as speculative overheating districts, meaning even if one buys a reconstruction apartment, the buyer cannot inherit association member status. The loan-to-value ratio (LTV) also fell to 40%, and the available mortgage amount decreased by 200 million to 400 million won.
The issue is whether regulations apply to sale transactions made before the Oct. 15 measures were announced. In land transaction permit zones, the effectiveness of a sale contract arises only after approval of the transaction by the local government. Some buyers were waiting for local government approval of the land transaction permit when the areas were designated as speculative overheating districts, creating the possibility that they cannot receive transfer of reconstruction association member status and will be subject to stricter loan regulations. This has caused confusion in the market over whether the point of application is the contract date or the date the land transaction permit was applied for before the contract was signed.
Differences in the speed of responses among real estate-related ministries to this issue are adding to market confusion. The Financial Services Commission moved early to say that in these cases, even if a sale contract had not been signed, if a land transaction permit was applied for before the regulation effective date, the previous loan rules would be exceptionally applied. If a land transaction permit was filed with the local government, the same loan regulations as before the effective date (LTV 70% and a maximum loan limit of 600 million won) would apply.
On the 15th, along with announcing the measures, the Financial Services Commission said, "For dwellings subject to the land transaction permit system, if a land transaction permit application was filed with the competent local government by the day before the effective date, the previous regulations will apply even if the dwelling sale contract is concluded afterward."
However, even two days after the announcement, the Ministry of Land has not issued an interpretation on this. No decision has been made on whether to set the timing of the restriction on the transfer of association member status as the contract date or the date of application for a land transaction permit with the local government. A Ministry of Land official said, "We are reviewing the relevant details." An official at the competent district office said, "As this is a matter of statutory interpretation, we are waiting for the Ministry of Land's decision."
As the Ministry of Land's interpretation is delayed, confusion in the market is increasing. A person identified as A, who bought Complex 13 in Mok-dong on the 29th of last month, said, "The purchase agreement and land transaction permit application were made before the designation as a speculative overheating district," and added, "I think it is an unfair retroactive application to indiscriminately block even end-users who followed the transaction procedures. Because the Ministry of Land has not provided clear guidelines, many good-faith end-users are being harmed."