Exemption for Landlords' Actual Residence and Exception Rules for Jeonse Loan Recovery Likely

Government to Announce Supplementary Measures
LTV Restrictions Expected to Be Revised

'Balloon Effect' Targeted with Additional Non-Regulated Area Measures
Jeonse Loan Guarantees May Be Further Strengthened

Kim Sang-jo, Chief of Policy Office at the Blue House, is briefing on real estate measures, responses to Japan's export regulations, the Korean New Deal, supplementary budgets, and other current issues at the Press Center on the afternoon of the 21st.
[Image source=Yonhap News]

[Asia Economy Reporter Yoo In-ho] The government has been criticized for undermining trust in its policies by suggesting supplementary and additional measures just four days after announcing the June 17 real estate measures. This is because key measures such as loan regulations are facing revisions even before being implemented.

According to the Ministry of Economy and Finance, Ministry of Land, Infrastructure and Transport, Financial Services Commission, and industry sources on the 22nd, Kim Sang-jo, Chief of the Presidential Office Policy Office, stated at the one-year anniversary briefing the day before, "We are well aware of the many complaints from the public regarding the June 17 measures," and added, "If necessary, the Ministry of Land will prepare supplementary measures." It is known that the government has begun preparing supplementary measures to protect actual homebuyers and rental business operators.

The most likely supplementary measure is to establish an exception to the residency requirement for union members in reconstruction complexes within speculative overheated districts. This is because long-term rental business operators could suffer losses as only owners who have lived in the property for more than two years will be allowed to apply for sale in reconstruction projects that fail to receive union establishment approval within the year.

One of the relief measures currently being discussed is to exempt the residency obligation for rental business operators who registered before the announcement of the measures if they apply for sale before the rental obligation period expires. A Ministry of Land official said, "Early-stage reconstruction projects still have considerable time left, so most will be able to meet the two-year mandatory residency period," and added, "We will conduct a detailed survey of various cases affected by this measure, such as the remaining rental period of rental business operators, and prepare supplementary measures accordingly."

There is also a high possibility that restrictions on the loan-to-value ratio (LTV) for mortgage loans for non-homeowners who won real estate subscription lotteries will be supplemented. A representative case is a petition posted on the Blue House public bulletin board. The petitioner, a man in his 40s from Yeonsu-gu, Incheon, complained that the newly developed Geomdan New Town, where he won the lottery, was suddenly designated as a speculative overheated district, lowering the LTV to 40%. At the time of winning, the maximum LTV was 60%, but it dropped by 20 percentage points, making it impossible to move in.

Measures to immediately recall jeonse loans when purchasing homes worth over 300 million won in speculative areas and speculative overheated districts are also subject to supplementary measures. Since there could be victims if tenants from the previous lease period cannot move in, there is a possibility of an exception to loan recall until the expiration of the jeonse period.

However, the government has warned of the possibility of additional measures while preparing these supplementary measures. Kim said, "This measure does not exhaust all policy tools," raising speculation that additional measures may be introduced early if balloon effects occur.

The industry's view is that the top priority target for additional measures is likely to be non-regulated areas such as Gimpo and Paju, where balloon effects are emerging. The Ministry of Land, the main ministry in charge, has already begun reviewing additional regulations. After the announcement of the measures, prices in areas such as Gimpo Hangang New Town and Paju Unjeong New Town rose by tens of millions of won, showing signs of overheating, prompting market monitoring.

The Ministry of Land plans to immediately designate these areas as adjustment target areas if real estate prices continue to overheat. Earlier, on the 19th, the Ministry warned in an explanatory document that if balloon effects appear in non-regulated areas, "designation of regulated areas will begin immediately."

There is also a possibility that guarantees for jeonse loan funds will be strengthened. Although the public guarantee limit for jeonse loans has been reduced to 200 million won, the limit for the private guarantee institution SGI Seoul Guarantee is still 500 million won. Since banks allow loans if a guarantee is obtained from either public or private institutions, this is considered a loophole for gap investment. The government is understood to be already negotiating with SGI Seoul Guarantee to strengthen the guarantee limit.

This content was produced with the assistance of AI translation services.