"Welcome back, tenant-in-place deals"... Wave of gap-investment listings after easing of regulations

[Financial News] After the government partially eased the owner-occupation requirement tied to the Land Transaction Permit System on October 15 last year, a flood of so-called "tenant-in-place" properties has hit the market. These are homes sold with the existing tenant and lease deposit in place, a typical form of gap investment. The listings are spread across Seoul, from Gangnam and Gangbuk to Yeouido. Demand is very strong, and some in the market say, "For the first time in a while, the market has shifted in favor of buyers."
According to real estate platform Asil on the 16th, many gap-investment properties in Seoul have been identified since the government announced a supplementary "owner-occupation obligation deferral" measure on the 12th, ahead of the reinstatement of heavier capital gains tax for multi-home owners. The core of the supplementary measure is that when a multi-home owner sells a home in a regulated area to a buyer with no home, the owner-occupation requirement under the Land Transaction Permit System is deferred until the end of the lease contract. Market participants interpret this as effectively allowing certain types of gap investment.
On the 13th, the day after the announcement, at least several dozen listings appeared marked as "gap investment possible." These properties were found in most parts of Seoul, from Songpa in Gangnam to Yeouido and Gireum in Gangbuk. Representative complexes include Daechi Rael, Songpa Helio City, Guui Hyundai 5th Complex, Haengdang Daerim, Isu Prugio The Pretium, Raemian We’ve, Dongjak Hyupseong Hue Foret Signature, Magok 13th Complex Hillstate Master, Godeok Station Gap-eul Myeongga City, Gireum Dongbu Centreville, E-Pyunhansesang Hwarangdae, and Gangnam Seohee Starfield.
Some of the listings are officetels, but most are apartments. A real estate agent in the Gangnam area, identified as Mr. A, said, "Rather than small studios, we are seeing standard mid-sized units suitable for families of three to four," adding, "Depending on the property, there are urgent sales that have been discounted by around 200 to 300 million won."
The rapid increase in gap-investment listings is widely seen as a result of the government’s temporary easing of regulations. With the end of the grace period for heavier capital gains tax on multi-home owners now confirmed, many landlords had been unable to sell because of the owner-occupation requirement under the October 15 Real Estate Measures. As this key restriction has been lifted in part, more and more properties are coming onto the market.
Demand for gap-investment properties is high. In many cases, listings receive inquiries as soon as they go up and are quickly taken down. A real estate industry official noted, "Many people without homes see this as virtually their last chance," and added, "It has been a long time since we have seen such a sharp increase in purchase-related inquiries."
As this is only the initial phase of the regulatory easing, the number of tenant-in-place listings is expected to grow further. Another real estate agent, Mr. B, predicted, "After the Lunar New Year holidays, gap-investment listings are likely to increase further and could peak in March," and went on, "As we get closer to that point, inquiries will probably rise even more."
However, some analysts point out that although a window for gap investment has temporarily opened, lending regulations remain tight. In practice, this means that only cash-rich, no-home buyers can seize these opportunities. Under the June 27 Real Estate Measures announced last year, the government capped mortgage loans at 600 million won for homes priced at up to 1.5 billion won, 400 million won for homes between 1.5 and 2.5 billion won, and 200 million won for homes over 2.5 billion won.
For example, consider a gap-investment deal in Daechi Rael listed for 4 billion won. Even if there is a jeonse tenant who has put down a deposit of 1.5 to 1.6 billion won, the buyer would still need an additional 2.3 to 2.5 billion won in cash. This does not include acquisition tax and other taxes. A real estate industry official explained, "Even if gap-investment properties are coming onto the market, many buyers are still taking a wait-and-see attitude," and added, "It will be necessary to watch the market mood a little longer."

kjh0109@fnnews.com Kwon Jun-ho Reporter