Dongtan District in Hwaseong, Giheung District in Yongin, and Guri will be designated as a speculative overheating district, a regulated area, and a land transaction permit zone starting in July. In these three Seoul metropolitan areas where home prices have surged recently, restrictions on loans, taxes, subscriptions, and transaction permits will all take effect at once. The mortgage loan limit will shrink, and buyers will have to obtain approval from the local government to purchase an apartment, likely damping demand for the time being.
The Ministry of Land, Infrastructure and Transport said on the 30th that, after deliberation and resolution by the housing policy review committee, Dongtan District in Hwaseong, Giheung District in Yongin, and Guri will be newly designated as speculative overheating districts and regulated areas. The measures take effect July 1. Gyeonggi Province also designated the same areas as land transaction permit zones. The permit zone measures will be in force from July 5 through Dec. 31, 2027.
The biggest change is loans. When an area becomes regulated, the loan-to-value (LTV) ratio for mortgage loan borrowers who have no dwellings and for single-dwelling owners with a disposal condition falls to 40% from the current 70%. First-time homebuyers receive an LTV of 70%, but must move in within six months after the loan is executed. Mortgage loans for the purpose of additional dwelling purchases by those who already own a dwelling are, in principle, restricted.
The loan limit also decreases depending on the dwelling price. In the Seoul metropolitan area and regulated areas, when taking out a mortgage loan for the purpose of buying a dwelling, homes priced at 1.5 billion won or less allow up to 600 million won, those over 1.5 billion won and up to 2.5 billion won allow 400 million won, and those over 2.5 billion won allow only up to 200 million won. For would-be buyers considering high-priced complexes around Dongtan Station, the actual amount they can borrow will be sharply reduced.
Workarounds using jeonse loans and unsecured loans will also become harder. If a holder of a jeonse loan acquires an apartment worth more than 300 million won in a speculative overheating district, the jeonse loan may be subject to recall. Those who acquire an apartment worth more than 300 million won in a speculative overheating district will also face restrictions on using jeonse loans. Financial consumers holding an unsecured loan exceeding 100 million won cannot buy a dwelling in a regulated area for one year from the loan execution date.
Land transaction permit zone restrictions will also apply. However, Gyeonggi Province limited the permit requirement to apartments within the areas. Going forward, to sign a transaction contract for an apartment exceeding a certain size in these areas, buyers must obtain approval from the relevant city mayor or district head. Once approved, the property must be used for the permitted purpose for a certain period. Gap investment purchases not for actual residence are expected to become even more difficult.
The tax burden will also grow. In regulated areas, when multiple-dwelling owners sell a dwelling, they become subject to a capital gains tax surcharge. When the surcharge applies, owners of two dwellings pay the base rate plus 20 percentage points, and those with three or more dwellings pay the base rate plus 30 percentage points; the special long-term holding deduction is also excluded. End users seeking the one-household, one-dwelling capital gains tax exemption must, in addition to the existing two-year holding requirement, also meet a two-year minimum actual-residence requirement.
Acquisition tax will also be surcharged. In regulated areas, if a two-dwelling owner buys a home, an 8% acquisition tax rate applies; for three or more dwellings, a 12% rate applies. The exclusion of private purchase rental dwellings from the comprehensive real estate tax aggregation will also be limited. When conducting a dwelling transaction, buyers must submit a funding plan and a move-in plan regardless of price. In speculative overheating districts, supporting documents proving the source of funds, such as a certificate of deposits balance and an income amount certificate, must also be submitted.
The threshold for subscriptions will also rise. To obtain first-priority eligibility, two years must have passed since opening a subscription savings account, and the applicant must be the head of household. Household members of a person who won a lottery for another dwelling within the past five years are restricted from first-priority subscriptions. For private dwellings, the share allocated by the points system will increase, lowering the chances of winning for younger people with short no-dwelling periods and for those who already own a dwelling. After winning, repeat wins may be restricted for up to 10 years. Resale of pre-sale rights will also be banned for three years under Seoul metropolitan area regulated-area rules.
Urban renewal projects will also be affected. In speculative overheating districts, transfers of association-member status are, in principle, restricted after association establishment approval for reconstruction sites and after management and disposal plan approval for redevelopment sites. When a single-dwelling owner in a regulated area takes out interim payment or relocation loans tied to reconstruction or redevelopment, additional dwelling purchases are also restricted.