"Why Sell Again After Withdrawing Listings?"... Market Unmoved by Allowing Sale of Homes with Existing Tenants

On the Ground: "Worries About Rental Shortages, Not More Listings"

As early as the end of this month, non-resident single-home owners with tenants in designated land transaction permit zones (LTZs) will be able to sell their homes. This comes as the government decided to expand the exemption criteria for residency requirements within LTZs, amid growing concerns that the supply of homes for sale could shrink now that the temporary suspension of the increased capital gains tax for multiple-home owners ended on May 9. The government expects this measure will partially ease the lockdown in available listings. However, on the ground, many say that "a flood of listings is unlikely."

On May 12, the government announced that it would temporarily expand the exemption from the residency requirement within LTZs until the end of this year. If the buyer is a person without a home, they will be allowed to delay moving in until the end of the current lease, even if they purchase a property with an existing tenant.

The market atmosphere on the day of the announcement was generally calm. The head of a real estate agency in Ahyeon-dong, Mapo-gu, Seoul, commented, "After 6 p.m. on May 9, the last day of the capital gains tax suspension, multiple-home owners withdrew their listings with tenants from the market," adding, "Since these properties were originally listed only to avoid the tax penalty, simply allowing the sale of tenant-occupied homes will not bring them back to the market."

He further explained, "Unlike 2021, when gap investments were rampant and demand flooded into the provinces, most current buyers are those who live in Seoul on a jeonse lease and have purchased a home for investment purposes. These individuals are unlikely to put up their sole property for sale."

The manager of a real estate agency in Samseong-dong, Gangnam-gu, said, "Since the measure was just announced today, we haven't received a single inquiry yet. Prices need to fall for the market to move, but that's not happening, so there is virtually no reaction on the ground." He added, "While there may be some listings from non-resident single-home owners, they won't be significant enough to impact the market. There's no compelling reason to sell when holding onto the property could lead to price appreciation." He continued, "Ultimately, the market will be shaken when the property tax burden changes, but we're not at that point yet."

There are also concerns that jeonse and wolse (monthly rental) shortages could intensify, particularly in mid- to low-priced complexes below 1.5 billion won. The head of a real estate agency in Gireum-dong, Seongbuk-gu, stated, "Even if landlords offer 50 million won for moving expenses, tenants are unwilling to leave because it's so difficult to find new jeonse leases." He added, "Since Gireum-dong is an area with high demand for actual residence by newlyweds and others, if non-resident single-home owners' tenant-occupied properties are purchased by people without homes, we could see jeonse listings dry up entirely."

Experts also evaluated this measure as a supplementary policy for fairness but predicted that its impact on listings would be limited. Han Mundo, a graduate school professor at Myongji University, commented, "Since there are single-home owners who need to sell their homes due to moving or personal reasons, this measure is a necessary supplement," adding, "It could be somewhat helpful in increasing the number of properties for sale." However, he pointed out, "If the goal was to ease the lockdown in listings, the exemption from the residency requirement should have applied to both multiple-home owners and non-resident single-home owners from the beginning."

Professor Han further stressed the need for clear, detailed criteria. Even among single-home owners, there are separate regulations such as the residency requirement for homes subject to the presale price cap, making it difficult to apply a uniform standard to all 'tenant-occupied single-home' cases. He said, "Since the President has set the overall direction, the government needs to carefully define and announce the subjects and exemptions. If the policy is still under review, a roadmap for implementation should be provided to reduce market confusion."

Park Wongap, Chief Real Estate Expert at KB Kookmin Bank, believes this measure could help temper the market surge to some extent. He stated, "If listings from non-resident single-home owners accumulate in the market, it could help defend against abnormal price spikes, where home prices jump by tens of millions of won on just a few transactions."

However, Park cautioned against drawing simple conclusions about home price trends based solely on the increase in listings. He explained, "You can't simply say that more listings will lower prices and fewer listings will raise them. Listings are just one factor in determining price. If demand, interest rates, or investor sentiment move more significantly, prices could rise even with increased supply." Regarding the jeonse and wolse market, he added, "If non-resident single-home owners sell tenant-occupied properties and the buyers later move in themselves, jeonse supply will decrease, making the rental market even more unstable. It's difficult to predict how this will unfold."