As foreigners snap up prime real estate, calls for tighter regulations emerge

Foreign investors are snapping up multiunit buildings across Korea at levels not seen in nearly a year, fueling a fresh wave of public concern and political debate over real estate speculation, regulatory loopholes and national fairness.

Apartments in downtown Seoul are seen from Yeouido Square Tower in Yeouido, western Seoul on Aug. 16, 2022. [YONHAP]

Foreign investors are snapping up multiunit buildings across Korea at levels not seen in nearly a year, fueling a fresh wave of public concern and political debate over real estate speculation, regulatory loopholes and national fairness.

Foreign buyers filed 1,234 registrations for properties such as apartments, villas and commercial spaces in April, according to data from the Supreme Court’s online registry platform on Thursday. The figure nearly matches the record 1,242 cases seen in August 2023, underscoring a sharp resurgence of interest from abroad.

Hotspots for these purchases were largely outside Seoul. Incheon's Bupyeong District led the list with 206 transactions, followed by Danwon District in Ansan, Gyeonggi, with 180, Wonmi District in Bucheon with 168, Siheung with 155, Sangnok District in Ansan with 145 and Pyeongtaek with 142. In Seoul, most transactions occurred in Geumcheon District, with 49, followed by Guro District with 48 and Yeongdeungpo District with 47.

Of these 144 purchases, 114 — or 80.6 percent — were made by Chinese nationals.

In Seoul’s high-end neighborhoods, such as the three Gangnam districts and Yongsan District, U.S. and Canadian nationals accounted for 74 percent of the 112 purchases made by foreigners this year, with 64 by Americans and 19 by Canadians.

A significant portion of these are believed to be so-called “black-haired foreigners” — Korean nationals who acquired foreign citizenship but reside in Korea. Although real estate statistics do not distinguish overseas Koreans, only 10.4 percent of foreigners holding land in Korea were classified as “full foreigners” as of June last year.

“Most of the foreign buyers held U.S. citizenship, but they were either Korean Americans or naturalized U.S. citizens living in Korea,” said Kim Se-ung, head of Kevin Realty in Apgujeong-dong, southern Seoul.

“While we can’t verify Korean heritage through transaction reports, many foreign buyers submit documents in Korean or communicate in Korean by phone,” said a Korea Real Estate Board official.

An aerial view shows Baeksa Village in Nowon District, northern Seoul, undergoing demolition on May 15, with surrounding apartment complexes in the background. [YONHAP]

Recently, high-profile cases of foreign nationals purchasing expensive properties have stirred public debate. In November, a 244-square-meter unit on the 24th floor of Banpo Xi was purchased entirely in cash for 7.4 billion won by a citizen of Uzbekistan. In March, a Chinese buyer in their 30s purchased a detached house in Seongbuk-dong, central Seoul, with a land area of approximately 1,098 square meters and a total floor area of about 760 square meters, for 11.96 billion won.

Some domestic investors have voiced concerns over what they see as “reverse discrimination.” While foreign nationals must adhere to Korea’s regulations on loan-to-value (LTV) and debt service ratio (DSR) for domestic mortgage loans, there is no way to monitor loans they secure from financial institutions in their home countries.

“If they are short on funds, it’s not uncommon for them to take out loans back home,” said one real estate agent in Guro-dong, western Seoul.

Multiple-homeowners in Korea are subject to higher acquisition and capital gains taxes, but foreigners are often treated as single-homeowners even if they own property abroad, allowing them to avoid such penalties. Concerns have also been raised over illegal foreign currency transactions and money laundering. The Ministry of Land, Infrastructure and Transport identified 282 suspicious or potentially unlawful foreign real estate transactions last year.

“Some foreign buyers purchase apartments in Gangnam purely for speculative purposes, targeting rising monthly rent yields,” said Kim Hyo-seon, a senior real estate adviser at NH Nonghyup Bank.

A scene of Seoul's apartment complexes is seen from the Lotte World Tower in southern Seoul on Feb. 13. [NEWS1]

Experts say that while an outright ban on foreign home purchases may be unrealistic, limited restrictions on speculative buying should be considered.

“Korea could learn from overseas examples where foreign homebuyers must prove they intend to reside in the country before acquiring property,” said Woo Byung-tak, a real estate policy expert at Shinhan Premier Pathfinder.

Conservative People Power Party Rep. Koh Dong-jin, a member of the National Assembly’s Public Administration and Security Committee, recently submitted a bill to revise the Real Estate Transaction Reporting Act to introduce a permit system for land purchases by foreigners in the greater Seoul area.

“Countries like China impose restrictions on foreign real estate acquisitions, but Korea offers no such safeguards,” said Koh. “Reciprocity should be enforced, and foreign acquisition regulations should be strengthened gradually, starting with overheated areas in the capital region.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff. BY LEE HYUN [kim.minyoung5@joongang.co.kr]