The government is keeping the possibility of extending the land transaction permit zones, set to expire at the end of this year, open, raising concerns about the consistency between policies aimed at encouraging sales and those regulating transactions. Critics argue that even if tax reforms encourage multiple homeowners to sell their properties, the requirement for buyers to occupy the homes limits access for genuine buyers.
During a National Assembly audit on October 7, Hong Ji-sun, Minister of Land, Infrastructure and Transport, stated that the government is closely monitoring market conditions regarding the potential extension of land transaction permit zones in all of Seoul and 12 areas in Gyeonggi Province.
When asked again by Kim Jeong-jae, a lawmaker from the ruling People Power Party, about the possibility of an extension, Minister Hong responded, "Currently, we see some demand for the land transaction permit system." She emphasized the need to comprehensively assess housing prices and subscription competition rates before considering expanding regulations to areas like Incheon and Gyeonggi's Namyangju, Pyeongtaek, and Osan.
The government's review of maintaining the land transaction permit system aims to curb investment demand and stabilize housing prices. Minister Hong noted that housing prices in the three districts of Gangnam and Yongsan have begun to decline, and the rate of increase in other areas is also slowing, predicting that the price growth will continue to diminish as the year progresses.
Meanwhile, the government is encouraging the release of existing housing inventory through tax reforms. The tax reform plan announced in August includes a temporary easing of capital gains tax for multiple homeowners in designated areas from 2027 to 2028 and a gradual reduction of tax benefits for rental apartments in these areas.
The number of apartments for sale in Seoul has also increased since the beginning of the year. According to real estate big data firm Asil, as of October 6, there were 71,087 listings, up 14,086 (24.7%) from 57,001 on January 1. However, it is difficult to attribute this increase solely to the effects of tax reform.
The key issue is whether the increased inventory can be purchased by genuine buyers. For properties with tenants, the timing of the buyer's move-in must align with the end of the existing lease, which can create transaction constraints. Coupled with the financial burden of loan regulations, even those intending to occupy may find it challenging to purchase.
To address the difficulties in trading rented properties, the government has been expanding the scope of exemptions for actual residents. In May, it broadened the exemptions for first-time buyers purchasing homes with tenants, and last month, it extended the application deadline for exemptions until the end of 2027. Lease renewal contracts can also be recognized once, allowing for a delay in move-in until the end of 2029 if conditions are met.
However, these exemptions apply only to first-time buyers who meet specific criteria. The remaining challenge is how much these measures can alleviate transaction constraints for genuine buyers looking to sell their existing homes. As the government considers extending the land transaction permit system, it must also evaluate whether the expanded exemptions lead to actual transactions.
Kim Hyo-sun, a senior real estate expert at KB Kookmin Bank, commented on the expansion of the land transaction permit system's exemptions for actual residents, stating, "In a situation where tax reforms can lead to more inventory, the land transaction permit system should reduce obstacles to transactions. It seems intended to allow transactions and rentals to continue for homes occupied by tenants, even recognizing renewal contracts."
* This article has been translated by AI.
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