Kim Tae-hee, Ha Jung-woo, Soyu, and Other Celebrities Selling Owned Buildings One After Another... Why?

From the 17th, LTV Regulation of 70% on Non-Residential Mortgage Loans for Officetels and Commercial Buildings
Land Transaction Permission Zones Limited to 40% from July
Market Contraction Concerns Lead Famous Celebrities to Sell Buildings One After Another
"Advantages of Small Buildings Disappear... Demand Decline Feared"

[Asia Economy Reporter Ryu Tae-min] Recently, as famous celebrities have been selling off buildings they owned one after another, controversy has arisen over whether the building market has reached its peak. Since the 17th, loan regulations for non-residential properties such as office and commercial buildings have been tightened, leading to claims that buying demand will cool down.

According to the industry on the 20th, from the 17th, the loan-to-value ratio (LTV) for loans secured by non-residential properties such as land, buildings, and commercial spaces has been limited to 70% across all financial institutions. Previously, only mutual finance institutions such as agricultural, fisheries, and credit cooperatives were managed under administrative guidance, but this has now been expanded to all financial sectors.

In particular, from July, in designated land transaction permission zones, the LTV for new secured loans on non-residential properties will be limited to 40%. The government’s intention is to apply the same LTV level as for residential properties to prevent speculation. Currently, land transaction permission zones in Seoul include Gangnam-gu’s Samseong, Daechi, Cheongdam, Apgujeong-dong, Songpa-gu’s Jamsil-dong, and Yongsan-gu’s Ichon-dong.

The industry views the recent wave of small building sales by celebrities as not unrelated to the easing of loan regulations. Regarding celebrities such as Kim Tae-hee, Ha Jung-woo, and Soyou selling their buildings one after another, online real estate communities have posted concerns asking, "Has building investment reached its ‘peak’?"

Small buildings refer to medium-sized buildings with a total floor area of 3,000㎡ or less, seven floors or fewer, and a sale price under 5 billion KRW. Recently, as Seoul real estate prices have generally risen, the price criterion for small buildings has sometimes been extended up to 10 billion KRW.

‘Small Buildings’ Benefited from Apartment-Focused Regulations

Until now, as real estate regulations focused on the housing market, relatively less regulated small buildings and commercial spaces attracted liquid funds. Since loans up to 80% of the building price were possible, investors could maximize leverage while enjoying rental income and capital gains from sales. Especially, apartments priced over 1.5 billion KRW cannot be purchased with loans and must be bought with cash only, increasing the burden on housing investment, which made the small building market popular as income-generating real estate. However, the industry consensus is that if loan regulations restrict funding, buyers’ financial burdens will increase, potentially freezing transactions.

The small building market in Gangnam is expected to be particularly hard hit. Currently, small building transactions are most active in Gangnam-gu, which is designated as a land transaction permission zone. According to proptech company Real Estate Planet, in the first quarter of this year, Gangnam-gu recorded 120 transactions of small buildings with a total floor area of 3,000㎡ or less, ranking first among Seoul’s 25 districts. By price range, transactions between 5 billion to 10 billion KRW, 10 billion to 20 billion KRW, and over 20 billion KRW were overwhelmingly highest in Gangnam-gu.

Researcher Cho Hyun-taek of the Commercial Information Research Institute said, “With the LTV regulation reducing the amount available for loans, individual investors with relatively limited funds will decrease, and institutional investors will increase. In land transaction permission zones, building owners rushing to sell before July are expected to increase, temporarily causing prices to fall.”

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