Invest1 publisher3 min readPublished
Suspected gap-investment deals in Seoul fall by two-thirds under the citywide permit rule
Data from Rep. Kang Deuk-koo's office show suspected gap-investment purchases fell 67.8% to 2,442 in about 11 months after Seoul became a permit zone. Buyers in their 20s and 30s now make up more than half of what remains, ahead of a year-end call on extending the zone.
The Investor · Invest desk
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What happened
- The count covers only purchases where the home carried both a tenant's deposit and a bank loan and the buyer listed its planned use as rental.
- Buying a home in a permit zone requires local approval before the contract is signed, and buyers are in principle required to live in it.
- Deals fell in 23 of Seoul's 25 districts, steepest in Seongdong at 88.4% to 92 from 793, while Jungnang and Geumcheon rose 83.3% and 130.8%.
- Deals by buyers in their 20s fell 18.6%, against 65.1% for buyers in their 30s and 76.4% for those in their 40s.
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Why it matters
- constraint An investor buying a Seoul flat to let now has to fund more of it with cash, because the deposit-plus-loan structure runs into both the residence rule and the non-occupier lending limits.
- exposure The leverage still in Seoul's gap market now sits mostly with buyers in their 20s and 30s, the group with the least equity behind each purchase.
- decision An extension at year-end would keep the squeeze on investors while the widened deferral for leased-out flats stays open to buyers with no other home, so the ministry is setting both rules at once.
The two windows differ in length, and the headline figure gains a little from that. The before period is a full year from Oct. 15, 2024, and the after period runs about 11 months to Sept. 17, 2026 [2]. Scaled to twelve months, the 2,442 deals [1] become about 2,664, a fall of roughly 65% from 7,579 [1]. Seoul Economic Daily, which obtained the analysis, wrote that the decline "cannot be attributed to the permit zone designation alone" [11].
In deal counts, the turn toward young buyers is small. Applying the published age shares to the totals, buyers in their 20s made about 235 suspected gap purchases in the year before and about 193 afterward [2]. Their share more than doubled on a fall of roughly 40 deals. Buyers in their 30s went from about 3,282 to about 1,143 [3]. Everyone 40 and over, by subtraction, went from about 4,062 to about 1,106, a drop of about 73% [5]. The two younger groups together moved from 46.4% of the count to 54.7% [4].
Both groups were drawing on the same two sources of money, a tenant's deposit and a bank loan [3]. The tax overhaul added lending limits for buyers who will not live in the home they buy [6]. According to the newspaper, buyers in their 20s and 30s who lack capital lean harder on loans and deposits [10]. It attributes rising demand for homes at 1.5 billion won or less, the band that qualifies for loans of up to 600 million won, to the same cause [10]. At that ceiling the loan covers 40% of the price, and the other 900 million won has to come from a tenant's deposit and the buyer's savings [6].
Every deal in the count listed "rental" as the buyer's planned use [3], inside a zone where buyers are in principle required to move in [5]. The analysis does not say which exemptions or deferrals let those 2,442 purchases through. The ministry has meanwhile widened deferrals of the occupancy requirement for homes already leased out, while keeping the rule that the buyer own no other home and the two-year residency obligation [13]. A first-time buyer can therefore purchase a flat with a tenant in it and move in later.
The decision on the designations covering all 25 Seoul districts and 12 areas of Gyeonggi [4] is due at the end of the year [12]. If the ministry extends them, the count should hold near its new level; if it lets them lapse, buyers over 40 can come back with their equity; and a comparison with all Seoul transactions over the same window could still show a citywide slowdown that the permit rule has been credited with. Hong Ji-sun, the land minister, said at her confirmation hearing last month that a decision on extending the designations would come after a close review of market conditions [15].
I think the rule did what it was built to do. Gap purchases by buyers 40 and over fell by close to three-quarters, and the young-buyer tilt is mostly a smaller denominator: the 20s group lost about 40 deals while the group over 40 lost nearly 3,000 [5]. The counter-case is that buyers in their 20s barely retreated because the rental market is under strain, and the newspaper described them as trying to "catch the last train to buying a first home" [14]. If total Seoul home purchases fell by a similar 65% over the same months [1], the permit zone was riding a broader decline and both readings overstate it.
What to watch
- Whether Jungnang and Geumcheon, the two districts where suspected gap deals rose, keep climbing as the rest of the city falls.
- Whether gap purchases by buyers in their 20s hold near their current level as deferrals for leased-out homes widen.
- Suspected gap-deal counts in Dongtan, Guri and Giheung, the Gyeonggi areas added to the permit zone from July 5.