Ministry of Land, Infrastructure and Transport: "Existing homeowners, state your reasons if you want to move to Daechi or Jamsil"

Guidelines on Land Transaction Permission Zones Presented

Purchasing with Jeonse Possible if Lease Period is 3 Months or Less
Partial Leasing of Commercial or Residential Properties Allowed for Actual Residence or Business

Homeowners Must State 'Reason for Residence' When Buying Homes in Permission Zones
Homeowners in Seoul and Nearby Areas Must Sell or Lease Existing Homes

The area around Jamsil-dong, Songpa-gu, Seoul, where the land transaction permit system will be implemented starting from the 23rd. [Image source=Yonhap News]

[Asia Economy Reporter Lee Chun-hee] The Ministry of Land, Infrastructure and Transport has issued guidelines addressing various challenges arising from the designation of Gangnam and Songpa as land transaction permission zones following Yongsan-gu in Seoul. It explained that transactions will be permitted if conditions such as the tenant’s residence ending within three months for housing, or the landlord using part of the commercial space, are met. Additionally, if one owns a house in another area, they must present a 'reason to live' in the designated zone to purchase a house there.

On the 23rd, the Ministry of Land, Infrastructure and Transport explained questions raised so far through the 'Q&A on the Designation of Land Transaction Permission Zones in Gangnam and Songpa Districts.' This follows the enforcement of the designation of four neighborhoods?Samsung, Daechi, and Cheongdam-dong in Gangnam-gu, and Jamsil-dong in Songpa-gu, Seoul?starting that day.

When designated as a land transaction permission zone, not only land exceeding the standard area but also houses and commercial buildings with land shares require approval from the head of the relevant local government for transactions. Engaging in transactions without approval may result in imprisonment for up to two years or a fine equivalent to 30% of the land price. Even with approval, the owner must directly reside or operate the property for the intended purpose for a certain period.

News that buyers must reside in the purchased house for two years after the transaction has led to concerns that so-called 'gap investments'?buying houses with tenants?will be blocked in the Gangnam and Songpa areas. Consequently, housing purchases by prospective buyers continued from the day of the policy announcement through yesterday.

However, the Ministry clarified that it does not completely block the purchase of houses with remaining lease periods. Since it takes about two to three months for ownership to transfer and land to be acquired, if the lease contract ends before ownership transfer, actual residence can occur.

Accordingly, the Ministry explained that if the balance payment date on the land use plan submitted during the land transaction permission application is within two to three months, and the applicant objectively proves that the lease contract expires by that date, approval can be granted.

Eunma Apartment and Commercial Area in Daechi-dong, Gangnam-gu, Seoul [Image source=Yonhap News]

The Ministry also stated that commercial properties are not prohibited from being leased after purchase. Under the current 'Enforcement Decree of the Real Estate Transaction Reporting Act,' leasing is permitted only for certain types of neighborhood living facilities (Types 1 and 2) where securing rental income is the main purpose and the building is actually used.

However, the owner’s business space and the leased space must be separately owned or divided, and a detailed lease plan must be prepared and submitted when applying for approval.

The Ministry explained that the same principle applies to housing: in the case of detached or multi-family houses, if the owner resides there, some remaining space can be used for rental purposes. However, considering potential abuse of this system, they plan to conduct usage surveys in the future.

Meanwhile, if one already owns a house in another area, moving to Daechi or Jamsil requires presenting a 'reason for residing in that area.' The Ministry stated that homeowners must provide specific and objective reasons for residence or additional acquisition when applying for land transaction permission for new housing. Especially, homeowners living in adjacent areas such as Seoul and Seongnam-si, Gyeonggi Province, must also submit plans to sell or lease their existing homes.

The Ministry plans to block attempts to circumvent land transaction permission through joint ownership. Currently, for shared land transactions where two or more people share ownership, the approval requirement is determined based on each share’s area. For example, even if the land share of a house is 30㎡, if a couple acquires it jointly with half shares, each share is 15㎡, which is below the 18㎡ approval threshold, leading to claims that transactions can proceed without approval.

However, the Ministry intends to consider acquisitions by household members such as spouses or family as acquisitions by the same person, summing the shared land area to determine approval requirements. In this case, even if a 30㎡ land share house is split and transacted in halves, the total area exceeds 18㎡, making it subject to land transaction permission.

On the other hand, some houses within the land transaction permission zones are exempt from the residence obligation. Apartments supplied through sales are not subject to land transaction permission and thus are exempt from the two-year residence requirement. A Ministry official said that for such new houses, "free lease contracts can be made."

On the 21st, urgent sale listings are posted at a real estate agency in Jamsil-dong, Songpa-gu, Seoul. [Image source=Yonhap News]

A Ministry official stated, "For real transaction reports after the announcement of land transaction permission zones, we will thoroughly review funding plans and supporting documents to strictly check for abnormal transactions such as illegal gifts," and added that they will also focus on false contract dates intended to evade approval.

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