Government extends owner-occupancy waiver for tenanted homes in land-transaction zones, but supply concerns linger

The government has extended a temporary owner-occupancy deferral that allows people without homes to purchase tenanted apartments in land-transaction permit zones, pushing the deadline to the end of next year. Experts say the move — which now covers lease renewal contracts as well — could unlock more listings and ease what has been a near-frozen housing sales market in Seoul. At the same time, concerns are growing that the measure may shrink the private rental supply as multi-home owners sell to owner-occupiers, and that a surge in lease renewals could sharply reduce new jeonse and monthly-rent listings in the short term, aggravating rental shortages.

According to the Ministry of Land, Infrastructure and Transport on Thursday, the deadline to apply for the owner-occupancy deferral — previously set for Dec. 31 this year — will be extended by one year to Dec. 31 next year. The government had originally allowed the deferral from May, permitting buyers without homes to postpone moving in until the remaining term of an existing tenant's contract had expired when purchasing a home in a land-transaction permit zone.

The extended measure now covers not only the remaining term of an existing lease but also one renewal contract — up to two additional years — that a tenant may exercise. As a result, buyers without homes will be able to defer their move-in date by up to three years and three months (15 months of application period plus 24 months of renewal) from the measure's effective date of Oct. 1, pushing their actual move-in as late as 2029.

To block speculative demand, however, eligibility is limited to buyers who have remained without a home continuously since May 12, when the deferral was first announced. After the lease ends, buyers must move in and reside in the unit for at least two years.

The government's decision to roll out a supplementary measure just four months after announcing the original deferral in May reflects its intent to preemptively remove barriers to listings by multi-home and high-value property owners ahead of the Aug. 3 tax reform package.

The tax reform plan includes a significant tightening of residency requirements for the long-term holding deduction available to single-homeowner households starting in 2028, along with a new cap on the deduction, while temporarily easing the capital gains tax surcharge on multi-home owners in 2027 and 2028. The government's aim to encourage listings of multi-home and high-value properties through next year was built into the plan, but repeated complaints that the existing deferral deadline — capped at year-end — made it difficult to trade tenanted homes prompted the additional fix.

Yang Ji-young, a senior adviser at Shinhan Premier Pathfinder, said many homeowners were already weighing a sale given the tax reform's implications for holding costs and future capital gains tax burdens, but transactions involving tenant-occupied homes in land-transaction permit zones had been hard to complete in practice. "If the tax reform gave people a reason to sell, this measure — extending the owner-occupancy deferral — has broadened the conditions under which they actually can," she said.

With the barriers to trading tenanted homes now eased, market observers broadly expect more tax-motivated listings to emerge and transaction volumes to recover at least partially.

Ham Young-jin, head of Woori Bank's real estate research lab, said the measure lowers the threshold for trading homes with sitting tenants that had been effectively blocked after year-end, opening the possibility of a modest increase in tradeable listings into next year. "Particularly if the planned reduction in the capital gains tax surcharge on multi-home owners in regulated zones next year and the revisions to the long-term holding deduction are confirmed, that could help increase listings and support a transaction recovery," he said.

Ham added that properties with good prices or locations that had been difficult to trade due to the owner-occupancy requirement could now re-enter the market. "From a seller's perspective, the pool of potential buyers grows, which increases the incentive to list rather than pull a property," he said.

Yang also described the measure as focused on normalizing end-user-driven transactions and improving market liquidity. "In areas like Seoul, where a high proportion of listings involve sitting tenants, there is a reasonable chance this will contribute in the short term to expanding the pool of tradeable properties and recovering transaction volumes," she said.

However, some analysts warn that because gap investment — buying a home with an existing jeonse tenant in place — has in effect become possible for buyers without homes, last-minute buying demand could concentrate through the end of next year and push prices higher.

Song Seung-hyun, chief executive of Urban and Economy, said listings may increase somewhat next year but prices could actually rise further. "With more than three years given for financing, there is a real possibility that a rush of late buyers concentrates at the end of the window," he said.

Yang also acknowledged the price impact cuts both ways. "More listings are a factor that eases upward price pressure, but at the same time, buyers without homes gaining the ability to purchase preferred complexes in advance could also expand buying demand," she said.

For the rental market, analysts see short-term residential stability but longer-term supply contraction as likely outcomes pulling in opposite directions. Existing tenants can secure additional time in their homes through renewal contracts, easing immediate fears of eviction — but rising demand for renewals could reduce the flow of new jeonse and monthly-rent listings.

Ham said that under the previous rules, a buyer of a rental home in a land-transaction permit zone could block a tenant's renewal right in order to move in, but the new measure recognizes one renewal of up to two years, strengthening tenant security of tenure. "In the short term, the measure is expected to have some effect in preventing a further reduction in jeonse listings," he said.

Yang also offered a positive assessment, saying the measure could help reduce unnecessary tenant relocations and ease jeonse market instability in areas where jeonse listings are already scarce.

Song, however, cautioned that an increase in sales transactions resulting from the extended deferral would not automatically translate into more jeonse listings. "With renewal contracts now covered by the deferral, existing tenants will try to hold on as long as possible, which could actually deepen rental market instability," he said.

The fact that the main sellers expected to bring tax-motivated listings to market through next year are predominantly multi-home owners is also cited as a longer-term source of rental market risk. When tenanted homes held by such owners are sold to buyers intending to live in them, the private rental supply those units previously provided through jeonse and monthly-rent arrangements shrinks.

Nam Hyeok-woo, a real estate researcher at Woori Bank, said that if sales listings from rental business operators, non-resident homeowners and multi-home owners concentrate as a result of the measure, jeonse and monthly-rent listings would decline in tandem. "There is also a possibility that volatility in jeonse and monthly-rent prices will increase," he said.

Ham stressed that it will be necessary to monitor whether the rental supply holds up over the longer term, given that buyers are scheduled to move in after their deferral periods end — in 2029 and beyond. "Rather than viewing this measure as a policy that dramatically expands the jeonse supply, it is more appropriate to see it as a regulatory fix that eases the friction between the sales market and the rental market," he said.