Mr. A purchased an apartment in Seoul owned by his father in joint names with his spouse for 1.5 billion won. He used 400 million won of his own funds and covered the remaining 1.1 billion won with a jeonse deposit. While inspecting this transaction, the Ministry of Land, Infrastructure and Transport discovered that the new tenant under the lease agreement was A's father. The Ministry deemed this transaction suspicious of illicit gifting. In response, it gathered explanatory materials and began a thorough investigation. The Ministry plans to notify the National Tax Service if this transaction corresponds to excessive deposits from a related party.
The Ministry announced on the 2nd that since October 10 of last month, it has been conducting on-site inspections of unusual apartment transactions in the three districts of Gangnam (Gangnam, Seocho, and Songpa) and major areas in cooperation with the Seoul city and the Korea Real Estate Board, while carrying out detailed planned investigations into the sources of funding.
This investigation is a follow-up action to the housing market stabilization measures of March 19. The goal is to prevent reckless overheating in the market caused by speculative demand influx to neighboring areas following the expansion of land transaction approval zones and to block illegal activities during real estate transactions in order to stabilize the housing market.
The inspection team is focusing on detecting illegal activities that disrupt the real estate market, such as collusion on home prices, fraudulent listings and reports, and inappropriate funding in relation to unusual transactions in the three districts of Gangnam and other major areas. As of the end of last month, on-site inspections were conducted in 35 apartment complexes across 11 districts, including Gangnam, Gangdong, Mapo, Seongdong, and Dongjak.
The Ministry is conducting a detailed planned investigation in cooperation with the Korea Real Estate Board, closely examining the appropriateness of funding sources and any suspicious transactions in relation to apartment transaction reports in the Seoul area this year.
Based on the analysis of the transaction report, it targets suspicious transactions such as those suspected of inflating house prices after reporting a transaction, unusual gifting, and transactions suspected of violating loan regulations for focused investigation.
Initially, from March 17, it requested explanatory materials from the parties involved in 204 cases suspected of being unusual transactions among the reports from January to February this year. By analyzing the submitted explanatory materials, it plans to verify the legality of the actions and notify relevant agencies, including the National Tax Service, the Financial Services Commission, the Ministry of the Interior and Safety, and local governments, according to the violations. It will also request investigations from the Korean National Police Agency.
So far, the inspection results have revealed about 20 instances of suspicious violations, such as suspected illicit gifting and excessive borrowings. One particular case detected was when acquiring an apartment for 4.7 billion won and borrowing funds from a related party. The buyer raised funds through 1.7 billion won of his own funds and 3 billion won of borrowed funds, which were borrowed from his father. The Ministry believes this transaction may qualify as presumed gifting and excessive borrowings from a related party, and is gathering explanatory materials and commencing a detailed investigation.
Additionally, the Ministry detected indications of trying to induce transactions above a certain price for apartment complexes in Seoul through a community application (app). Local governments are conducting additional investigations into this case, which is suspected of collusion on home prices.
The Ministry plans to conduct additional investigations on the reports from March and April as a second phase. If the market overheating continues, it intends to expand the target and duration of the investigation.
Kim Gyu-cheol, head of the Housing and Land Office at the Ministry, noted that "to stabilize the unusually overheated real estate market, it is essential to thoroughly detect illegal and unfair practices that disrupt market order and to block speculative demand through funding source investigations. We will work to eradicate illegal transaction practices through proactive and effective real transaction investigations, making every effort to stabilize the real estate market in cooperation with relevant departments and local governments, including the Financial Services Commission and the National Tax Service."