Government Offering 'Chakhan Jibjuin' Benefits... Market Response Remains Cold

Exemption from Tax on Actual Residence Requirements Eased to 1 Year for Rent Increase Under 5%
Only for Single-Homeowners with Official Price Under 900 Million Won... "Minimal Effect on Listing"
"Fundamental Solution to Jeonse Crisis is Supply... Need to Bring Out Multi-Homeowners' Listings"

Apartment complex in the Gangnam area of Seoul on the 20th

The government has introduced a supplementary measure recognizing one year of actual residence for "good landlords" to curb the sharp rise in jeonse and monthly rent prices following the implementation of the "Three Lease Laws," but the market's response remains lukewarm. This is because the measure applies only to houses with a publicly announced price of 900 million KRW or less and is not a fundamental solution to the supply issues, which are considered the main cause of instability in the jeonse and monthly rent market. Some even argue that such a patchwork solution could exacerbate instability in the jeonse and monthly rent market in the future.

◇ Effective only in Gangbuk, Gyeonggi, and Incheon... No significance in non-regulated areas = The landlord benefits included in the "2022 Economic Policy Direction" announced by the government on the 20th mainly relax the two-year actual residence requirement for capital gains tax exemption to one year for landlords who do not raise jeonse or monthly rent by more than 5%. This measure aims to address the side effects of the Three Lease Laws, such as the sharp rise in jeonse and monthly rent prices and the dual pricing phenomenon. According to KB Real Estate, nationwide jeonse prices (housing) rose by 14.46% from July last year to November this year.

However, to receive the good landlord benefits, the house must have a publicly announced price of 900 million KRW or less (at the time of contract) and meet the condition of being a single homeowner.

Ham Young-jin, head of the Zigbang Data Lab, said, "This measure is limited to areas with many houses priced at 900 million KRW or less, such as northern Seoul (Gangbuk), Gyeonggi, and Incheon." In fact, the Gangnam area, where even medium-sized apartments often exceed the 900 million KRW publicly announced price, is excluded from the benefits. According to the Ministry of Land, Infrastructure and Transport, about 520,000 multi-unit housing units exceeded the 900 million KRW publicly announced price, classified as high-priced housing, in the past year.

In fact, the Gangnam area has also led the rise in jeonse and monthly rent prices since the implementation of the Three Lease Laws. From July last year, when the laws were enacted, to November this year, the jeonse price increase rate in Songpa-gu reached 25%, while Gangnam-gu and Seocho-gu also surged by 18.83% and 20.94%, respectively. This is why there are criticisms that the supplementary measure has limitations in stabilizing the jeonse and monthly rent market. Moreover, considering that single homeowners who rent out their own homes can also be tenants, there is a structural limitation where landlords have no choice but to raise rents to cover their own rent increases.

Yoon Ji-hae, senior researcher at Real Estate R114, said, "The instability in the jeonse and monthly rent market is fundamentally caused by the pains during the implementation of the Three Lease Laws and the insufficient supply of jeonse properties. It seems difficult for this policy to have a significant effect on the market."

In non-regulated areas such as Wonju, Jeju, and Dongducheon, where prices for both sales and jeonse have risen this year due to outside investment, the two-year actual residence requirement does not apply from the start, so there is no rent suppression effect from this supplementary measure.

According to Asil, an apartment actual transaction information platform, Wonju ranks second in increased gap investment sales transactions over the past three months with 158 cases. Since July last year, Wonju's jeonse prices rose by 6.60%, below the national average increase, but the jeonse price increase rate over the past three months, when gap investment was active, was 1.27%, higher than some Seoul areas such as Gangbuk (1.09%) and Gangnam-gu (0.95%). Ham Young-jin of Zigbang Data Lab said, "For non-regulated areas, this measure seems to have little significance."

◇ Exclusion of multi-homeowners... Supply shortage remains unresolved = Experts agree that the most certain way to resolve the jeonse shortage is "supply." Sejong City, where the decline in jeonse prices has been remarkable recently, is a representative example. In the second week of December, Sejong City's jeonse supply-demand index was 91.3, the lowest among metropolitan local governments nationwide. Despite major positive developments such as the confirmation of the National Assembly Sejong branch building in September, it could not overcome the "supply bomb."

It is also pointed out as a problem that benefits are excluded for multi-homeowners, who are a key source of rental supply. Ko Jun-seok, adjunct professor at Dongguk University Law School, said, "Many multi-homeowners recently feel the tax burden, and if given some incentives, they might put short-term properties on the market."

There are criticisms that the government’s patchwork measures, released one after another to appease public sentiment ahead of the presidential election, only increase market confusion. This measure is also a temporary policy applied until the end of next year, so the stability of the jeonse and monthly rent market after the year following next cannot be guaranteed. Seo Jin-hyung, president of the Korea Real Estate Society, said, "Populist policies emerging with an eye on the presidential election are only increasing confusion among landlords and tenants."

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