Tightening Loans and Blocking the Spillover Effect... Third Real Estate Policy by Lee Administration [Real Estate AtoZ]

[10.15 Measures] Housing Market Stabilization Announced at Real Estate Ministers' Meeting
All of Seoul and 12 Areas in Gyeonggi Province Designated to Curb Spillover Effects

The government has designated all of Seoul, as well as most of the greater metropolitan area where housing prices have recently risen-including Gwacheon, Gwangmyeong, and Suwon-as regulated zones. The loan-to-value (LTV) ratio for first-time homebuyers has been reduced to 40%, and tax disadvantages in these areas have increased. Gap investment-buying homes with tenants in place-has been completely blocked. The government has mobilized a broad range of demand-suppression measures to prevent the so-called "balloon effect," where overheated housing prices spread to neighboring regions. In contrast, highly anticipated tax reforms such as property holding taxes will be considered further before implementation.

On October 15, the government convened a meeting of ministers related to real estate and announced these housing market stabilization measures. This comes less than a month after President Lee Jaemyung took office, following the June 27 Household Debt Management Plan and the September 7 Public-Led Housing Supply Expansion Plan. Despite these major policies, housing prices in some areas have continued to surge rather than stabilize, prompting the government to introduce additional measures within a month.

Minister of Land, Infrastructure and Transport Kim Yoonduk stated, "Market instability in areas adjacent to the Han River is spreading to neighboring regions. There is growing concern about capital inflows into the housing market amid a global trend of interest rate cuts and supply-demand imbalances. We will respond preemptively to block housing market instability early and ensure capital is invested in more productive sectors."

All of Seoul and 12 Areas in Gyeonggi Province Designated as Regulated and Land Transaction Permit Zones

The government has expanded the designation of "adjustment target areas" and "speculative overheating districts," previously limited to the three districts of Gangnam and Yongsan in Seoul, to include the remaining 21 districts of Seoul and 12 additional areas in Gyeonggi Province: Gwacheon, Gwangmyeong, Seongnam (Bundang, Sujeong, Jungwon), Suwon (Yeongtong, Jangan, Paldal), Dongan in Anyang, Uiwang, Hanam, and Suji in Yongin.

Once designated as regulated zones, various restrictions apply to loans, taxes, and housing subscriptions. For first-time homebuyers (including those with one home under the condition of disposal) in newly designated regulated areas, the LTV is set at 40%. Previously, the LTV for first-time buyers in northern Seoul and Gyeonggi Province was 70%. Multi-homeowners in the metropolitan area have already had their LTV reduced to 0% under the June 27 measures. Additional restrictions will apply to household loans, including a ban on jeonse loans before property transfer, an 80% guarantee limit on jeonse loans, and limitations on purchasing additional homes when taking out interim or relocation loans.

In addition, there will be various tax disadvantages, such as increased acquisition and capital gains taxes for multi-homeowners and exclusion from long-term holding special deductions. Private housing subscription systems, such as resale restrictions and resident priority supply, will also face various limitations. Redevelopment projects will be affected, including restrictions on the transfer of membership rights. Buyers will also be required to submit funding plans and move-in plans.

These areas have also been designated as land transaction permit zones, in addition to being adjustment target areas and speculative overheating districts. The designation covers all apartments in these areas, as well as row houses and multiplex housing complexes that include at least one apartment building within the same complex. The measures were published in the official gazette on this day and will remain in effect from October 20 until the end of next year. Previously, only apartments in the three Gangnam districts and Yongsan, as well as redevelopment complexes in Apgujeong, Yeouido, Mokdong, Seongsu-dong, fast-track redevelopment and reconstruction complexes, Yongsan maintenance depot, and public housing development districts, were subject to these regulations. The new designation significantly broadens the scope of land transaction permit zones.

In land transaction permit zones, buyers must obtain approval from local governments and are required to actually reside in the property for two years from the date of acquisition. Failure to comply may result in enforcement fines or cancellation of the permit. The measure completely blocks "gap investment," which involves purchasing property using tenants' deposits. The LTV for non-residential mortgage loans in these zones will also be reduced from 70% to 40%.

Apartment complexes in downtown Seoul as seen from Seoul Sky observation deck at Lotte World Tower, Songpa-gu, Seoul. Photo by Yonhap News Agency

For a Home Worth 2.5 Billion Won, Maximum Loan Reduced from 600 Million to 200 Million Won

In the metropolitan area and regulated zones, loan limits will be applied differentially based on market value. For homes valued at 1.5 billion won or less, the loan limit remains 600 million won. For homes between 1.5 billion and 2.5 billion won, the limit is 400 million won. For homes exceeding 2.5 billion won, the maximum loan is 200 million won. Last year, the average transaction price for apartments in Gangnam and Seocho districts in Seoul exceeded 2.5 billion won. The mortgage stress rate for these areas has been raised from 1.5% to 3.0%. When a single-homeowner in the metropolitan area or a regulated zone takes out a jeonse loan as a tenant, the interest repayment will now be reflected in the borrower's total debt service ratio (DSR).

The government has identified various illegal activities as a key driver of soaring housing prices and will establish a dedicated supervisory body under the Prime Minister's Office to address them. Previously, authority was divided among the Ministry of Land, Infrastructure and Transport, the Financial Services Commission, the National Tax Service, and the police, with no investigative authority, making timely responses difficult. Until the new body is established, the Ministry of Land and the National Tax Service will operate separate reporting centers, while the police, under the National Investigation Headquarters, will mobilize 841 officers for a special crackdown on real estate crimes. To ensure the smooth implementation of last month's housing supply expansion plan, a housing supply monitoring task force-including relevant ministries, local governments, and public institutions such as Korea Land and Housing Corporation (LH)-will hold biweekly meetings to accelerate project timelines.

Minister Kim stated, "If we miss the golden window for stabilizing the housing market, it will become even more difficult for citizens to secure homes and achieve housing stability. We will work to stabilize housing supply and demand, support housing security for the public, and boost economic vitality."