The government and the Seoul Metropolitan Government have announced the operational guidelines for the land transaction permission zone (land transaction system), which include that those who already own dwellings can buy or rent (monthly lease) within six months. Those looking to acquire apartments in Gangnam and Yongsan, which are subject to the land transaction system, will need to carefully review these guidelines to determine how to acquire and dispose of dwellings. Until now, the government required individuals with existing dwellings to sell their current properties in order to acquire dwellings in the land transaction zone, but this time, renting them out on a monthly basis has also been permitted. The deadlines for handling existing dwellings were previously different by autonomous district, but have now been unified to within six months.
As the government and Seoul City finalize this policy, controversy is expected to escalate. The government acknowledged that there is no need to sell existing dwellings to acquire new dwellings in the land transaction zone, and there is no way to compensate those who sold their existing dwellings due to the previous prohibition on rentals. There are also concerns that excessive administration may lead to negative side effects.
According to the Ministry of Land, Infrastructure and Transport and Seoul City on the 2nd, the ministry has finalized key operational guidelines related to the land transaction permission zone and has informed Seoul City. A Seoul City official noted, “The Ministry of Land, Infrastructure and Transport conveyed the key operational guidelines for land transactions, and we have shared them with each autonomous district.”
The most significant change in these guidelines is that individuals who already own dwellings can acquire new dwellings in the land transaction zone without having to sell their existing dwellings. This is because the government has added rental options that were previously not allowed in the processing of existing dwellings. It is analyzed that the government is concerned about the potential controversy over property rights violations if it forces the sale of existing dwellings while applying the land transaction system to all apartments in the three districts of Gangnam (Gangnam, Seocho, Songpa) and Yongsan, which amount to 400,000 households.
The guidelines state, “If an applicant owns more than one dwelling and intends to purchase an additional dwelling in the land transaction permission zone, approval is possible if a processing plan stating that the existing dwelling will be sold or rented within six months from the date of approval is submitted.” It is also noteworthy that the disposal period has been unified to within six months. Until now, Gangnam and Songpa had a disposal deadline of one year, while Seocho and Yongsan had deadlines of four months each.
In transactions of dwellings in redevelopment and reconstruction areas, a requirement to fulfill the utilization obligation period (actual residence period) of two years stipulated in the land transaction system was proposed. There were cases where it was difficult to actually reside for two years due to the real estate being demolished as part of the maintenance project, making immediate residency impossible, or due to demolition after occupancy.
The guidelines state, “The duration of residence in the previous real estate and the period of residency after moving in once redevelopment or reconstruction is completed can be combined to determine whether the utilization obligation period has been fulfilled.” For example, if an individual resided for one year before the previous real estate was demolished after management permission, it would be possible to obtain approval if they state they will reside for the remaining obligation period of one year from the actual possible occupancy date.
There has been division on whether occupancy and sale rights are subject to the land transaction system. Occupancy rights are given to members of redevelopment and reconstruction associations for newly constructed apartments, while sale rights are the rights of lottery winners to occupy. Occupancy rights transactions are subject to the land transaction system, but sale rights are not. However, to resell sale rights to a third party, permission must be obtained from the relevant authority of the city, county or district.
Experts have pointed out that there is inconsistency in excessive regulations. Park Hapseo, an adjunct professor at Konkuk University's Graduate School of Real Estate, said, “There were people who sold their dwellings because they had to do so to buy dwellings under the land transaction system, but now if they can rent them out, what will happen to those who sold their homes due to government regulations? The issue has always been that acquiring dwellings under the land transaction system could be a matter of merely renting them, and if they were told to sell their homes, it means the government has acknowledged excessive administration on its part.”
Kim In-man, head of the Kim In-man Real Estate Economic Research Institute, said, “This is the unification of guidelines that differed by autonomous district, but it should have been unified and presented from the beginning when the land transaction system was expanded to apartments starting in 2020 to avoid confusion in the market.” He added, “The system was enacted haphazardly from the start, and with its recent expansion to cover all of Gangnam and Yongsan, the issues have worsened.”