The government decided to allow only people without homes to buy "rented-out houses." The move is meant to give an exit to multiple-home owners who find it hard to dispose of dwellings by May 9 because tenants are still living there, but many say transactions may not increase due to lending limits. Deals are likely to occur selectively among "cash-rich" buyers.
On the 12th, the government announced "supplementary measures related to the end of the temporary relief on heavier capital gains taxes for multiple-home owners." If a sale contract is completed by May 9, heavier capital gains taxes will not be applied as long as the balance payment and registration are completed within four months in Seoul's three Gangnam districts (Gangnam, Seocho, Songpa) and Yongsan District, and within six months in other regulated areas. For dwellings where tenants are living, only people without homes will be allowed to buy by deferring the two-year owner-occupancy requirement.
This effectively allows "gap investment (buying with a jeonse tenant in place)," but observers say the market impact will be limited. That is because the available loan amount is smaller than for a standard sale. For example, when a roughly 1.5 billion won apartment in Seoul is bought in a standard sale, the maximum mortgage loan limit is 600 million won. But if it is bought with a 600 million won jeonse in place, taking a junior loan is not possible.
At the time of balance payment, it is in theory possible to take a junior loan for the difference after subtracting the jeonse deposit from the loan limit calculated by applying the LTV (loan-to-value ratio for dwellings, 40% in regulated areas), but in this case the available loan amount is 0 won (600 million won minus 600 million won). First-time homebuyers are subject to a 70% LTV and can theoretically borrow. However, junior loans carry greater risks, such as lower repayment priority, so their interest rates are higher than senior loans. A bank official said, "In theory, a junior loan is possible up to the amount remaining after subtracting the jeonse deposit from the LTV limit, but the risk is high, and under the government's strengthened household loans management guidelines, we do not extend many such loans."
An additional loan available is up to 100 million won in jeonse tenant payout funds. This loan, aimed at returning deposits to tenants at the end of a lease as a household stabilization mortgage, was capped at 100 million won under the June 27 lending regulations.
An official at the financial authorities said, "For high-rent dwellings with relatively low deposits, the loan limit will not differ much from a standard sale."
Nam Hyeok-woo of Woori Bank Real Estate Research Institute said, "There could be some increase in buying by people without homes seeking quick-sale properties from multiple-home owners whose tenants' leases still have time left, to secure future self-occupancy and prime locations, but because buyers must move in when the lease expires and there are many constraints on the loan limit, transactions are likely to be limited to 'people without homes who have purchasing power.'"
Ham Young-jin, head of Woori Bank Real Estate Research Lab, said, "Due to lending regulations, demand from people without homes will flow more into 600 million won to 1 billion won listings in Nowon, Dobong, and Gangbuk districts (Nodogang) and Geumcheon, Gwanak, and Guro districts (Geumgwan-gu) than into upgrading to higher-end areas in Seoul."
Some also say it is hard to guarantee that an increase in listings from multiple-home owners will lead to higher transaction volume and stabilized home prices. Lee Eun-hyeong, a research fellow at the Korea Institute of Construction Policy, said, "The government is inducing a large volume of sales in a short period, but it will take time to see whether this will lead to meaningful transactions that push market prices down."