Nonresident foreigners banned from purchasing homes in Seoul

Foreigners intending to invest in Korean real estate must now reside in the property for two years and obtain approval, aimed at curbing speculative purchases in Seoul, Gyeonggi and Incheon.

Tourists takes photos on Mount Namsan in central Seoul on Aug. 21. [YONHAP]

Foreigners who do not intend to live in Korea will now be barred from buying homes in Seoul and parts of Gyeonggi and Incheon. Any purchase will require approval, and buyers must reside in the property for at least two years. This effectively blocks “gap investment” — buying homes while leasing them out under Korea’s jeonse (lump-sum deposit) system — and is expected to curb speculative transactions by foreign buyers.

The announcement was made by the Ministry of Land, Infrastructure and Transport on Thursday. While land transactions by foreigners have previously been restricted in certain areas for national security reasons, this is the first time such regulations have been introduced to stabilize the real estate market.

Starting Tuesday, the permit zones will cover all of Seoul; 23 cities and counties in Gyeonggi, excluding Yangju, Icheon, Uijeongbu, Dongducheon, Yangpyeong, Yeoju, Gapyeong and Yeoncheon; and seven districts in Incheon, excluding Dong, Ganghwa and Ongjin Districts.

The designation will last for a year, though the ministry said it may extend that period depending on market conditions.

Foreign individuals, corporations and governments who purchase homes in these zones will need approval from the local government head and must move in within four months of signing the contract. They will be required to live there for at least two years.

Real estate listings are posted in Seoul on Aug. 17. [NEWS1]

In other words, foreigners will no longer be able to own homes through gap investment — purchasing a property while leasing it out under Korea’s jeonse system. Violations may result in fines of up to 10 percent of the purchase price, and contracts may be nullified if necessary.

If part of the purchase price is funded from overseas, foreigners must obtain approval before closing on an apartment. Within 30 days of signing, they are also required to file a transaction report along with a financing plan and supporting documents. The financing plan must include details such as the name of the overseas financial institution, the amount borrowed or remitted and the type of visa held in Korea.

Seoul has already designated southern Seoul's Gangnam, Seocho and Songpa Districts and central Seoul's Yongsan District as permit zones, for both domestic and foreign buyers, but those restrictions only covered apartment purchases. The new measure for foreigners goes further, extending to detached houses, town houses, multifamily homes and other residential properties. Commercial buildings such as officetels, which are studio-style buildings often used for both residential and business purposes, remain excluded.

An apartment complex in Seoul is pictured on July 27 [YONHAP]

The government introduced the measure amid concerns that foreign buyers were exploiting loopholes in the June 27 mortgage regulations, which do not apply to funds brought in from overseas. Critics also pointed out that foreigners can sidestep tax rules, such as heavy levies on owners of multiple homes, sparking complaints of discrimination against Korean buyers. In effect, foreigners who can secure funding abroad have faced few barriers to purchasing property in Korea.

Foreign housing transactions in the Seoul metropolitan area rose from 4,568 in 2022 to 7,296 in 2024, an annual increase of more than 26 percent, according to real estate transaction report data. With 4,431 transactions recorded through July this year, the number of foreign home purchases is projected to surpass the current record of 7,596 by the end of this year.

Many transactions involved luxury homes bought in cash or under the names of minors, raising concerns about speculative activity. U.S. and Chinese nationals accounted for the largest share. Cases included a 25-year-old foreigner purchasing a detached house for 7.5 billion won ($5.36 million), and another buying an apartment in Yongsan District for 18 billion won, entirely in cash deposits.

As of the end of last year, foreigners owned 100,216 homes in Korea, accounting for 0.52 percent of the total housing stock. By nationality, Chinese buyers made up the largest share at 56.2 percent.

Listings on Juwai, China’s largest real estate website, show dozens of luxury properties in Seoul on the market. A unit in the PH129 complex in Cheongdam-dong was priced at 107 million yuan ($14.9 million), while La Terrasse Hannam in Hannam-dong, Yongsan District, central Seoul, was listed for 105 million yuan. Other high-end properties on the site include a Signiel Seoul unit in Jamsil, southern Seoul, advertised as “a south-facing 45th-floor home with lake views,” and Penthill Nonhyeon in Nonhyeon-dong, described as offering “a comprehensive luxury urban lifestyle.”

Tourists view Seoul from Mount Namsan in central Seoul on Aug. 21. [YONHAP]

The new restrictions are expected to slow speculative housing investment by foreigners. First Vice Land Minister Lee Sang-kyeong said the government will strictly monitor whether foreign homeowners fulfill residency requirements.

“We will block foreign activities that distort the housing market from the outset and work to stabilize prices, thereby contributing to the housing welfare of Korean citizens,” he said.

Lee Eun-hyung, a researcher at the Korea Research Institute for Construction Policy, welcomed the move, arguing that it addresses fairness concerns between Korean and foreign buyers.

“However, because the new rule focuses only on filtering out speculative demand through proof of residency, it falls short of leveling the playing field with Koreans when it comes to access to loans,” he said.

Similar restrictions are already in place overseas. In China, foreigners are granted only land-use rights, not ownership, and can buy homes only if they have lived in the country for more than a year. Australia has banned foreigners from purchasing existing homes for two years starting in April. Canada, which introduced a two-year ban on foreign purchases of residential property in January 2023, has since extended the measure.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom. BY JEONG EUN-HYE [shin.minhee@joongang.co.kr]