South Korean financial authorities will exempt non-resident single-homeowners from new jeonse (lump-sum deposit) loan restrictions if they have legitimate reasons such as children's schooling, job relocation, or caring for elderly parents.
The Financial Services Commission is reviewing measures to tighten jeonse loan regulations for non-resident single-homeowners with speculative intent, according to financial industry sources on the 15th. The move aims to block speculative lending while minimizing impact on those with genuine housing needs.
Critics have pointed out that some non-resident single-homeowners are distorting the real estate market by purchasing properties in premium areas while living elsewhere on jeonse loans. "There is internal concern about jeonse loans deviating from their original purpose of stabilizing housing for ordinary citizens," a financial authority official said.
However, the FSC is reportedly struggling to define the scope of "investment and speculative single-homeowners" that President Lee Jae-myung has targeted for regulation. Many non-resident single-homeowners have relocated for unavoidable reasons such as job transfers or family circumstances.
The FSC has decided to allow exceptions for socially accepted reasons. Authorities view job transfers, caring for parents, and children's schooling as representative cases. "There will be sufficient consideration for non-resident single-homeowners with understandable genuine housing needs," an official said.
For speculative non-resident single-homeowners, regulations will be strengthened. Restricting public guarantees is under consideration. Currently, single-homeowners in the Seoul metropolitan area can receive jeonse loan guarantees of up to 200 million won through Korea Housing Finance Corporation or Housing and Urban Guarantee Corporation. Authorities are considering eliminating these guarantees entirely. Without public guarantees, banks would likely stop offering such loans.
Regulations based on housing prices or income levels are also being discussed. The Moon Jae-in administration prohibited jeonse loan guarantees for owners of properties valued above 900 million won in January 2020.
Tighter credit loan regulations for multi-homeowners and non-resident single-homeowners are also likely. The FSC limited credit loans to 100% of annual income through measures announced on June 27 last year, but stricter standards may apply to these groups. The FSC is distancing itself from imposing interest rate penalties. "Interest rates are determined by the market," an official said.
For apartments held by registered rental business operators in Seoul and regulated areas, loan maturity extensions will not be granted in principle. The FSC estimates 12,000 such apartments in the metropolitan area and regulated regions carry bank loans with lump-sum maturity repayment terms. About 10,000 of these loans mature this year. Authorities are also considering a soft-landing approach that extends maturities until tenants' lease contracts expire.
Financial authorities aim to announce the measures next month after detailed policy review. Household loan volume management targets, originally scheduled for finalization late last month, will be announced simultaneously.