The government will extend until the end of next year a grace period that lets buyers of tenant-occupied homes in land transaction permit zones delay moving in. The revision comes just four months after the May measure that first introduced the grace period, as strains in the jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent) and monthly-rent market deepened. Analysts expect the change to ease trading in homes with sitting tenants and increase the number of listings, though critics say it undermines the owner-occupancy principle behind the permit system and the predictability of housing policy.
The Ministry of Land, Infrastructure and Transport said on the 17th that the application deadline for the grace period announced in May will be pushed back one year, from Dec. 31 this year to Dec. 31 next year. Under the May measure, a non-homeowner buying a home in a permit zone that is occupied by a tenant could delay moving in until the end of the initial lease. Applications had been limited to those completing land transaction permit filings by the end of this year, a window now extended to the end of next year. The recognized grace period has also been widened from the current lease to cover a renewed lease.
The additional extension follows the Aug. 3 tax overhaul, which included a temporary easing of heavier capital gains taxes on multiple-home owners and a phased end to tax benefits for rental apartments purchased in designated adjustment zones — steps designed to encourage home sales in the near term. The ministry plans to give public notice of the proposed revision to the real estate transaction reporting law on the 18th of this month and put it into effect on Oct. 1. To use a renewed lease, the buyer must sign the renewal before applying for the grace period, in which case move-in can be delayed for up to three years and three months from the effective date. Buyers must have remained non-homeowners continuously since May 12, and the requirement to live in the home for two years after moving in still applies.
The measure reflects a proposal from Kwon Chil-seung, chairman of the Democratic Party of Korea's policy committee. "Applications for the expanded grace period on owner-occupancy duties in land transaction permit zones are only possible through the end of this year, so anyone seeking to sell a home next year under the tax overhaul cannot apply," Kwon said, calling for the grace period to be extended and lease renewals to be allowed. Observers read the move as an attempt to soothe public sentiment on property stirred by the tax overhaul, amid a recent slide in the ruling party's approval ratings.
Experts said the follow-up measure should have some effect on the frozen jeonse and monthly-rent market. "With sales by multiple-home owners, owners of a single home who do not live in it, and registered rental operators likely to cluster next year under the tax overhaul, this grace period will help homes with sitting tenants trade more smoothly," said Nam Hyuk-woo of the Woori Bank real estate research institute. "It gives a bit of breathing room to a market short on listings for sale." He added a caveat: "Because this is a policy that encourages listings to come out, it could also cut the supply of jeonse and monthly-rent units, raising the risk of greater volatility in lease prices."
The head of a brokerage in Seoul's Seodaemun district also welcomed the change. "Trading a home with a jeonse tenant requires a written pledge that the tenant will move out, and that has often caused friction between landlords and tenants, so allowing renewed leases is a positive," the broker said. "Transactions are subdued because of strict lending rules, but opening up trading in tenant-occupied homes should help revive activity."
Others argue the permit system itself needs a review, saying repeated revisions erode confidence in policy and chip away at the owner-occupancy requirement. After all of Seoul and 12 areas in Gyeonggi Province were designated permit zones last October, listings dried up and tenants faced difficulties, prompting the government in February to grant an owner-occupancy exemption limited to homes sold by multiple-home owners. Amid a dispute over fairness, it broadened the grace period in May to include homes owned by single-homeowners who do not live in them, and the latest widening of the deadline and scope has left the system's purpose — permitting only transactions intended for the buyer's own residence — largely hollowed out, analysts said.
"Side effects such as strains in the jeonse and monthly-rent market should have been anticipated when the owner-occupancy rule was first designed, but instead the policy was rolled out and follow-up measures keep coming as problems emerge," said Shin Bo-yeon, a professor in the real estate AI convergence department at Sejong University. "Continually extending the grace period fails to build confidence and can create victims who acted in good faith." Lee Eun-hyung, a research fellow at the Korea Research Institute for Construction Policy, said: "Policy consistency is being maintained, but frequent revisions are evidence that the policy was not sufficiently prepared. Keeping a policy that tells owners to put rental homes on the market while at the same time preserving rental supply to stabilize the jeonse and monthly-rent market is a contradiction."
