Financial Regulators Target Non-Resident Single Homeowners

Financial authorities are expanding their loan regulation scope from multi-homeowners and rental business operators to non-resident single homeowners.

The Financial Services Commission held its fourth meeting on multi-homeowner loan regulations on the 3rd, reviewing regulatory measures for single homeowners who do not actually reside in their properties. Discussions reportedly included reducing jeonse loan limits for speculative or investment-purpose single homeowners and restricting mortgage extensions as is done for multi-homeowners. The plan would apply actual residency requirements—imposed on new mortgage borrowers since the June 27 measures last year—to those who took out loans before June last year. Following President Lee Jae-myung's suggestion of disadvantages for non-resident single homeowners, financial authorities appear to be accelerating their regulatory preparations.

Gap investments utilizing jeonse loans have triggered moves to premium areas and increased upward pressure on housing prices. The government seems to expect that pressuring non-resident single homeowners will bring properties to market and stabilize prices. The problem is that many actual end-users cannot live in their own homes due to children's education, workplace locations, or caring for elderly parents. Moreover, financial institutions currently have few means to determine whether single homeowners are non-residents or what their actual purpose of ownership is. Applying uniform loan standards citing practical limitations risks creating innocent victims.

The housing market should rightfully be reorganized around actual end-users rather than speculative demand. However, the priority of real estate policy must be stabilizing housing for ordinary citizens. Even while regulating non-resident single homeowners, the government must devise sophisticated policy measures including exceptions to prevent end-users from suffering unjust consequences. Plans to reduce long-term holding special deductions for single homeowners must also be precisely designed according to housing prices and regional characteristics. Above all, it is urgent to earn market confidence through a realistic supply roadmap. While housing price increases in areas such as Gangnam's three districts have slowed, market anxiety is growing as rental housing shortages accelerate. The government and local authorities must work together on follow-up measures to the January 29 supply plan and private sector project activation, while the National Assembly must expedite supply-related legislation. There are concerns this approach of consistent regulation may repeat the mistakes of the Moon Jae-in administration, which caused numerous side effects.