"Now I Have No Home": Is It Really an Uphill Battle to Become a Homeowner? The Regulations That Got in the Way [Real Estate Walk]

[Financial News] 'Real Estate Walk' will present carefully selected real estate issues and investment information to readers, as chosen by experts. <Editor's note>
Recent reports said that President Lee Jae-myung is selling his Bundang apartment. He said he would dispose of the home in February this year, but the sale has taken longer than expected, apparently because of various regulations. So what rules have been holding up the sale of the Bundang apartment?

The first obstacle was the land transaction permit zone. Once an area is designated as a land transaction permit zone, approval is granted only for actual use. In practice, that means owner-occupancy. The problem is that the owner-occupancy requirement does not just restrict buyers; it also makes it harder for sellers to dispose of a home.
Under the current rules, the buyer must move in within four months of the permit date. In effect, sellers can only dispose of homes they are already living in or homes that are vacant. If a tenant is living there, the sale is possible only with the tenant's consent. In some cases, money is even being paid under the label of 'moving expenses.' If the tenant flatly refuses, nothing can be done.

In May, MOLIT announced a plan to expand the grace period for owner-occupancy in land transaction permit zones for all homes with tenants. The original exception to the land transaction permit system, which took effect on May 9, applied only to multi-home owners. The new measure also extended the exception to single-home owners who are not living in the property.
So the home should be easy to sell, but that has not been the case. Another problem was that financing was difficult to obtain. Loans are capped at 600 million won for homes priced at 1.5 billion won or less, 400 million won for homes up to 2.5 billion won, and 200 million won for homes above 2.5 billion won. Large units in Bundang are worth more than 2.5 billion won.
The problem is that even the 200 million won ceiling is hard to fully secure. MOLIT changed the rule so that single-home owners can sell without the tenant's consent. However, the condition is that the buyer must be a homeless buyer and must live in the home when the lease expires.
At the very least, buyers in such cases should be able to get a jeonse eviction loan, but that is not allowed. Compared with properties where normal move-in is possible, there are restrictions on mortgage lending, which creates a burden for buyers.

Another issue is that the buyer pool shrinks because only homeless buyers are allowed to purchase. The buyer eligibility for the owner-occupancy grace period is limited to those who have remained homeless since the announcement date.
In other words, even if a current single-home owner sells their home, they are not supposed to use the benefit, because the rule was created for people who have stayed homeless since the announcement date. It seems the authorities did not fully account for the fact that blocking loans makes buying even more difficult.

As the news of the sale was delayed, some even wondered whether the home could be sold at all. The reason is the rule banning the transfer of union member status.
Under the relevant law, in a Speculative Overheating District, union member status cannot be transferred after approval for the establishment of a union in a reconstruction project, or after management and disposition approval in a redevelopment project. Therefore, the property must be sold before union establishment approval is granted. In the case of the Bundang Yangji Village reconstruction, the project is being carried out through a trust-based method, and an application has been filed for designation of the project implementer. Once a public notice of designation of the project implementer, which is equivalent to approval for the establishment of a union in a union-based method, is issued, union member status can no longer be transferred.

There are exceptions. A person who has owned and lived in a single home for 10 years or more may still succeed to union member status even after union establishment approval is granted. President Lee Jae-myung met the requirements, but First Lady Kim Hye-kyung, who received a share as a gift, did not meet the 10-year ownership requirement. Inheritance allows the ownership and residency period to be carried over, but gifts do not.
According to reports, the home was sold quickly for about 200 million won below market price. The land transaction permit procedures have been completed, and the contract is expected to proceed soon. But the problem is that it is still not fully over.
The ownership transfer must be completed before union establishment approval, or before the public notice of designation of the project implementer. If the contract has only been signed and union establishment approval is then granted, the buyer cannot inherit union member status and becomes a cash settlement recipient.
At present, regulations are piling up one after another, creating many obstacles to transactions. In addition, although numerous regulatory policies have been implemented, the results remain far from stabilizing home prices. I believe institutional improvements are needed where the system is unreasonable./Kim Je-gyeong, Director of Tumi Real Estate Consulting※This article reflects the author's personal views and may differ from the editorial direction of this newspaper.
ljb@fnnews.com Lee Jong-bae Reporter