"Will the Expiring Residence Requirement Exemption for Land Transaction Permission Zones Be Extended Amid Concerns Over Multi-Homeowner Property Listings?"

Discussion of Tax Reform Supplementary Measures
Authorities Weigh Risks of Stimulating Speculative "Gap Investment"

The government is considering extending the special provision that allows a temporary exemption from the “residence requirement” for housing in land transaction permission zones, a policy currently set to expire at the end of this year. This move appears aimed at resolving the conflict between tax policies designed to encourage multi-homeowners to sell their properties, and the land transaction permission system, which restricts the sale of homes with existing tenants.

View of apartment complexes in downtown Seoul from Seoul Sky, the observation deck of Lotte World Tower in Songpa-gu, Seoul on the 7th. Photo by Yonhap News

According to relevant ministries on August 9, the government is currently discussing the details of expanding the scope of the exemption from the residence requirement under the land transaction permission system. In line with its policy direction of increasing the incentive for owners to sell—such as through easing the punitive transfer income tax—the extension of the application deadline for the exemption beyond this year is being seriously considered. Lee Hyung-il, First Vice Minister of Economy and Finance, also stated in a recent broadcast interview that the ministry is preparing to further expand the exemption in order to alleviate transaction inconveniences caused by the land transaction permission system.

Under the current enforcement ordinance of the Real Estate Transaction Reporting Act, those who purchase a home in a land transaction permission zone must move in within four months after obtaining permission and actually reside there for two years. However, given that immediate occupancy may be difficult if a lease contract is still in effect, the government has operated a temporary special provision that allows people with no home ownership to postpone the residence requirement until the lease expires when purchasing a tenanted home. This provision only applies to permits granted by December 31 of this year.

The issue is that the deadline for this special measure does not align with the recently announced schedule for relaxing the punitive transfer tax under the tax law reform plan. Through this reform, the government intends to lower the additional transfer tax for multi-homeowners for the next two years and gradually reduce benefits for registered landlords, hoping to stimulate property listings in the market. However, if applications for the exemption end this year, sales of properties with tenants will effectively become impossible from next year, which could weaken the expected effect of bringing more supply to the market.

Accordingly, the government is also considering not only extending the exemption period, but also updating the reference date for determining which properties’ leases are eligible for the special measure. The goal is to expand the scope of properties with tenants that can be sold, in order to support home disposals in line with the revised tax policies.

However, authorities remain cautious, as excessively easing the requirements could stimulate renewed speculative investment, such as “gap investment.” A government official said, “We are reviewing matters related to the exemption from the residence requirement, but details such as the scope of expansion have not been finalized yet.”

Meanwhile, the government is also accelerating follow-up measures in response to the newly announced tax law amendments. It plans to specify reasons for non-residency exemptions in enforcement ordinances for the comprehensive real estate tax and transfer tax, and intends to soon announce additional measures to expand housing supply and provide financial support for people without homes and for youth.

This content was produced with the assistance of AI translation services.