The government has begun work to tighten lending regulations on "nonresident single-home owners" for speculative purposes. It is effectively telling them, as it does multiple-home owners, to "sell homes you don't live in," but experts are skeptical that this will actually lead to "more listings → lower home prices."
According to government circles on the 17th, the government is preparing measures to regulate jeonse loans for nonresident single-home owners, with an announcement expected as early as early May. The leading options reportedly include banning guarantees for new jeonse loans for nonresident single-home owners and prohibiting maturity extensions for existing jeonse loans.
The impact on the market is expected to be more immediate than the ban on extending mortgage loans for multiple-home owners. Unlike mortgage loans, which typically have a 30-year term, jeonse loans must be renewed every two years. For this reason, the government expects that nonresident single-home owners whose jeonse loan extensions are immediately denied or whose tenants' move-out financing is blocked will have no choice but to sell their dwellings.
The reason the government has pulled out the single-home owner regulation card is that the pace of multiple-home owners listing their properties has slowed. According to real estate big data platform Asil, as of the previous day there were 75,549 apartments for sale in Seoul, down 2.9% from 77,772 on the 1st of this month. An official at a licensed real estate agency in Songpa District said, "Those who were going to sell have already sold their dwellings ahead of the May 9 resumption of heavier capital gains taxes," adding, "Listings have already started to decrease since late March, and home prices that had been falling have turned flat."
However, the argument is gaining traction that the regulation on nonresident single-home owners will not easily increase dwelling listings. That is because nonresident single-home owners are more likely to choose to live in the property than to dispose of it. Nam Hyuk-woo of Woori Bank Real Estate Research Institute said, "In areas with good residential environments close to workplaces and in strong school districts, nonresident single-home owners may return for actual residence, which could reduce for-sale listings and increase rental demand," adding, "This could increase volatility in jeonse prices in those areas."
Some also say the trend of "jeonse turning into monthly rent" could accelerate. A real estate expert said, "If a jeonse loan can't be extended, you can just switch to monthly rent and live. I expect many nonresident single-home owners will hold out by converting to monthly rent rather than actually selling," adding, "As a result, demand for monthly rentals will rise, speeding up the shift from jeonse to monthly rent, and the volume of properties for sale may not increase." In other words, it could only add to turmoil in the lease market.
It is also expected to be difficult to screen out speculative purposes among nonresident single-home owners. The government is reportedly reviewing exceptions, including children's education, workplaces, and caring for parents. Earlier, on the 1st, President Lee Jae-myung said on X (formerly Twitter), "If a property is for residence rather than for gap investing (buying with a tenant in place) and is temporarily nonresident for unavoidable reasons such as work, it is clearly excluded from (the denial of tax benefits)." He made clear that those temporarily residing elsewhere due to work, children's education, and the like would be excluded, and the key issue will be how to further segment other reasons.