Seoul homeowners rush to move back in as owner-occupancy rules tighten

Apartment buildings in Daechi-dong, Gangnam-gu, seen from the rooftop of Eunma Apartment Building 11. [Herald DB]

This is a top school-district area, so many owners have been renting out their homes. But lately, three or four out of every 10 leases coming up for renewal end with the owner moving back in. The tenants who came here for the education are the ones getting pushed out.

대치동 공인중개사 A씨

— A, a licensed real estate agent in Daechi-dong

As the government tightens owner-occupancy requirements across lending and tax policy in a bid to curb speculative demand, a growing number of landlords and tenants are finding themselves in a bind. Concerns are mounting that a recent measure effectively barring jeonse loans for homeowners who have never lived in their own property will swell the ranks of jeonse refugees and deepen the concentration of residents in the Greater Seoul area.

According to real estate industry sources, the number of landlords in Daechi-dong, Gangnam-gu, announcing plans to reclaim their units and move in themselves has risen sharply. The head of a nearby agency said owner move-ins at the Raemian Daechi Palace complex have surged, with three or four out of every 10 expiring leases ending in tenant eviction.

Daechi-dong is a prime school-district neighborhood, and many owners who bought there for their children's education have been renting out their units after their children finished school. Those owners are now choosing to move back in, driven by concerns over comprehensive real estate tax and capital gains tax liabilities that apply to non-resident single-homeowners.

The urgency is even greater for those who have never lived in their property at all. The Financial Services Commission recently announced that starting next year, single-homeowners who purchased an apartment in the Greater Seoul area or a regulated zone and have never resided there will be barred from taking out new jeonse loans or renewing existing ones — leaving many with no choice but to vacate their current homes and move in.

The agency head said a businessman who bought a unit in Daechi-dong before it was designated a land transaction permit zone — prior to 2020 — while keeping a tenant in place is now living outside Seoul and is expected to return soon to take up residence.

Urgent sale listings from multi-home owners posted at a real estate agency in Seocho-gu, Seoul, on Friday. [Yonhap]

The trend is stoking fears that an already serious jeonse shortage will worsen further. With jeonse listings already shrinking and prices surging, a wave of landlords choosing to move in — partly because they can no longer extend jeonse loans — could squeeze supply even tighter.

According to real estate platform Asil, as of Wednesday, Seoul had 21,023 apartment units listed for jeonse and 17,737 listed for monthly rent. Compared with the same period last year — 23,074 jeonse listings and 18,819 monthly-rent listings — the figures represent declines of 2,051 units (8.9 percent) and 1,082 units (5.7 percent), respectively.

The shrinking supply of jeonse and monthly-rent listings has pushed jeonse prices higher, with the average jeonse price for Seoul apartments topping 700 million won ($495,000) for the first time. According to KB Real Estate's national housing price trend survey, the average jeonse price for Seoul apartments reached 704.58 million won in July, the highest since the data series began in June 2011. The average has been rising for three consecutive years since hitting 571.3 million won in August 2023.

Some analysts warn that the government's push to enforce owner-occupancy could accelerate the concentration of population in Seoul. The policy has effectively created conditions in which even people living outside the capital for work feel compelled to move back.

"Regional populations are already declining, and this could make the Seoul concentration even worse," an anonymous real estate expert said. "People who have no real need to live in Seoul will be forced to live there anyway."

hss@heraldcorp.com