Government extends residency grace period to non-resident one-home owners, says it is not allowing gap investment

[Financial News] The government has decided to expand the scope of people eligible for a grace period on the residency requirement in land transaction permit zones to include non-resident one-home owners. It said the move was aimed at addressing fairness issues among sellers, as the grace period had previously been available only to some multi-home owners. However, the government repeatedly stressed that even if transactions with tenants in place are allowed, the residency requirement and loan regulations will remain in force, adding that it is "not allowing gap investment."■Grace period for residency expanded to non-resident one-home ownersAt a briefing at Government Complex-Seoul on the 12th, Kim Yi-tak, first vice minister of the Ministry of Land, Infrastructure and Transport, said, "Because the residency grace period had been applied only to some multi-home owners, there was a fairness issue between multi-home owners who could not receive the benefit and non-resident one-home owners." He added, "We plan to expand the grace period to all homes with tenants in place, but only for cases where applications for land transaction permits are submitted by the end of the year."
Under the current rules in land transaction permit zones, a buyer must move in within four months of purchasing a home and live there for two years. The government said it will now extend the residency grace period, which had previously been granted only in a limited way to some homes sold by multi-home owners, to homes owned by non-resident one-home owners as well. The measure applies only to homes that were already being rented out as of the 12th, the day of the announcement, and an application for a land transaction permit must be submitted by Dec. 31 this year.
MOLIT repeatedly explained that the measure does not mean gap investment using jeonse deposits will be allowed, as was the case before the designation of land transaction permit zones. Vice Minister Kim emphasized, "The basic framework of the land transaction permit system, which requires actual residency, remains unchanged."
Eligibility for the residency grace period is also limited to people who have remained without a home since the announcement date. Those who sell their existing home after the announcement and become homeless are excluded. Once a lease ends, the move-in obligation takes effect again, and actual residency must begin no later than May 11, 2028.
The government said penalties for noncompliance with the residency requirement may include fines or revocation of approval. Jung Woo-jin, director of land policy at MOLIT, said, "Annual fines of up to 10% of the acquisition price can be imposed," adding, "If intent is clearly established, revocation of approval may also be considered." He added, "The basic purpose of the land transaction permit system is to encourage transactions centered on actual residency, so we plan to strictly manage transactions that do not fit that purpose."■Loan rules remain in place... "Transactions centered on end users"The government also addressed concerns that allowing home transactions with jeonse deposits in place could effectively revive gap investment. MOLIT explained that even if such transactions become possible, buyers would still need substantial cash to complete the purchase. Yoon Deok-gi, team leader for financial policy at the Financial Services Commission, said, "For example, if a 1.2 billion won home has a 700 million won jeonse deposit, the 40% LTV rule would apply, making a new mortgage virtually impossible."
Lee Yu-ri, head of the housing policy division at MOLIT, said, "In practice, this is a structure in which end users with sufficient capital make the purchase." On concerns about instability in the jeonse and monthly rental markets, she added, "As rental supply declines, rental demand also falls, so there is no major issue in aggregate."
Meanwhile, market participants have voiced concerns about a decline in rental supply and a possible concentration of listings in the mid- to low-price range. Nam Hyuk-woo of the Woori Bank Real Estate Research Institute said, "With non-resident one-home owners now included, the pool of potential sellers has widened, but capital gains tax surcharges and loan regulations still remain, so the likelihood of a sharp increase in listings in the short term is limited." He added, "In school districts and areas close to workplaces, some people may move back, which could reduce the number of rental listings."
en1302@fnnews.com Jang In-seo Choi Ga-young Reporter