Financial Authorities Target Non-Resident Single-Home Owners After Multi-Home Owners: "Existing Gap Investments Also Under Regulatory Scope"

Following last year's June 27 measures that effectively blocked new gap investments, the financial authorities are now strengthening regulations on existing non-resident single-home gap investors. The policy direction is to expand the scope of oversight from loans to certain multi-homeowners, which had been in a regulatory blind spot, to include loans related to "speculative non-resident single-homeowners" who purchase homes with jeonse deposits.

On the 26th of last month, densely packed apartment complexes could be seen throughout the city from the Namsan Observatory in Seoul. Photo by Yonhap News Agency

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On March 2, an official from the financial authorities stated, "We are reviewing regulations on speculative non-resident single-homeowners to stabilize the real estate market," and added, "While new gap investments have been blocked by the June 27 measures, there have been no separate measures for existing gap investors, so we are considering institutional improvements."

Previously, the Financial Services Commission blocked most new gap investments through the June 27 measures. For home mortgage loans in the Seoul metropolitan area and other regulated zones, a mandatory move-in within six months was imposed. In addition, conditional jeonse loans that allowed buyers to use tenants’ jeonse deposits to pay the purchase price were also banned. Subsequently, the October 15 measures imposed a two-year residency requirement for all home purchases in Seoul, which is widely seen as having effectively shut down new gap investments.

However, existing gap investors who purchased homes using jeonse deposits before the June 27 measures have so far been excluded from direct regulation. The financial authorities are now reviewing supplementary management measures to make it disadvantageous for these individuals to hold homes without actually residing in them.

This move is interpreted as a follow-up to President Lee Jaemyung's recent announcement of plans to strengthen regulations on non-resident single-homeowners, following similar measures for multi-homeowners. On the 26th of last month, President Lee stated on social media platform X (formerly Twitter) that he would "mobilize all policy tools to create a situation where it is more advantageous for those holding a single house for investment or speculative purposes, rather than residential use, to sell rather than retain ownership." He further demonstrated his commitment to stricter regulations by listing his own apartment in Bundang-gu, Seongnam, Gyeonggi Province-which he had owned for 28 years-for sale.

The financial authorities also view gap investment as one of the factors driving up housing prices. They believe that the use of jeonse deposits or loans as leverage to purchase homes has triggered a chain migration to higher-value areas, thereby increasing upward pressure on prices. Accordingly, while genuine owner-occupancy will be protected, the authorities plan to impose greater burdens on single-homeowners who hold properties for investment or speculation, even if they own only one property.

There are various predictions in the market regarding the financial regulations that could be introduced for non-resident single-homeowners. A financial industry insider said, "One option being discussed is to strengthen reviews at the time of maturity extension for existing tenant jeonse loans related to homes owned by non-resident single-homeowners." The source added, "However, considering the potential impact on the jeonse market, it is also possible that a phased approach will be taken, focusing first on high-priced homes or those in regulated areas." There is also speculation that oversight could be tightened on cases where non-resident single-homeowners use jeonse loans to live in another property.

However, concerns have been raised that if uniform regulations are applied solely based on residency status, people who relocate due to unavoidable reasons-such as job transfers, children's education, or caring for elderly parents-could be adversely affected.

In addition, the financial authorities are also reviewing a plan to restrict maturity extensions for existing loans to multi-homeowners. It has been reported that in addition to restricting extensions for loans to residential rental business operators who own apartments in Seoul and the metropolitan area (regulated zones), restrictions on maturity extensions for loans to non-residential rental business operators who own commercial buildings or offices are also under consideration.

On March 3, the Financial Services Commission is scheduled to convene the financial sector under the leadership of Vice Chairman Kwon Daeyoung to discuss loan regulation measures aimed at normalizing the real estate market. It is expected that stronger regulations on loans for both multi-homeowners and non-resident single-homeowners will be discussed.

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