"All Sales of Homes With Tenants Allowed... No Issues With Rental Supply-Demand Balance" [Actual Residence Obligation Deferral Q&A]

Q&A from the Ministry of Land, Infrastructure and Transport Briefing
Legislative Notice for Enforcement Decree Begins May 13

Starting as early as the end of this month, non-resident single-homeowners with tenants in land transaction permission zones will also be able to sell their homes. Non-homeowner buyers will be allowed to defer the actual residence obligation until the end of the tenant's lease contract, not only for properties previously owned by multiple-homeowners, but also for those owned by non-resident single-homeowners.

On May 12, Kim Itak, First Vice Minister of the Ministry of Land, Infrastructure and Transport, stated during a press briefing at the Government Complex Seoul, "Since the exemption from the actual residence obligation applied only to some multiple-homeowners, there was an issue of fairness between non-resident single-homeowners and multiple-homeowners who could not benefit from it." He added, "We intend to expand the temporary suspension of the actual residence obligation, which was previously applicable only to certain multiple-homeowners, to cover all homes, but only for those applying for a land transaction permit by the end of the year."

Kim Itak, First Vice Minister of the Ministry of Land, Infrastructure and Transport, explained on the morning of the 12th at the Government Seoul Building in Jongno-gu, Seoul, about the plan to temporarily suspend the actual residence obligation applied to home buyers in land transaction permission zones for all houses with tenants (only when the buyer is a non-homeowner). Photo by Yonhap News.

The Ministry of Land, Infrastructure and Transport plans to announce a legislative notice for the Enforcement Decree of the Real Estate Transaction Reporting Act containing these changes starting May 13. Previously, in land transaction permission zones, only multiple-homeowners could have the actual residence obligation deferred for homes with tenants until the end of the lease contract. Now, this benefit will be extended to all properties with tenants.

The target is non-homeowner buyers who apply for a land transaction permit with the relevant authority by December 31. However, to prevent the system from being abused by homeowners engaging in 'gap investment,' the exception will only apply to buyers who have maintained non-homeowner status continuously since the announcement date, May 12.

The following is a Q&A summary with officials from the Ministry of Land, Infrastructure and Transport.

Q. There is concern that allowing non-resident single-homeowners to sell properties with tenants could reduce the supply of rental properties and exacerbate rental shortages. What is your response?

A. Since this measure grants the deferral of the actual residence obligation only to non-homeowners, if non-homeowners who were previously tenants purchase these properties, there will be an offsetting effect that reduces rental demand. From the perspective of market balance, there should not be a significant decrease in the overall supply of rental properties.

Q. For properties with tenants, is there a risk that only non-homeowner buyers with sufficient financial resources will be able to purchase, thus limiting the effect of increasing housing supply for non-homeowners?

A. In fact, this measure does not aim to stimulate purchase demand by easing loan regulations. It is appropriate that only genuine end-users with sufficient capital are able to buy homes. In regulated areas, if the jeonse-to-price ratio exceeds the loan-to-value (LTV) limit of 40%, mortgage loans are not available, so buyers must have a carefully planned financial strategy.

Q. What happens if the buyer does not actually reside in the property after the lease contract expires?

A. Failure to reside in the property constitutes a violation of the land transaction permission system's requirements, and an enforcement fine will be imposed. The fine is imposed once a year and can be up to 10% of the acquisition price. If a buyer is found to have deliberately obtained a land transaction permit under false pretenses, the permit will be revoked and the transaction itself may be rendered invalid.

Q. Can you specify the expected impact on the supply of properties for sale due to this new measure?

A. While we do not expect as large an increase as was seen prior to the end of the capital gains tax exemption for multiple-homeowners, we do anticipate a significant effect. However, the actual number of new listings and transactions will depend greatly on market sentiment and is difficult to predict with certainty.

Q. Some argue that this move could fundamentally undermine the principles of the land transaction permission system. How do you respond?

A. While this measure does ease the obligation to reside in the property within four months after receiving a land transaction permit, it does not eliminate the two-year actual residence obligation. The core framework of the system remains in place, and this measure will only be applied temporarily until the end of December.

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