Foreigners and Corporations Must Obtain 'Permission' for Real Estate Transactions in Gyeonggi Province Starting October

Kim Hong-guk, spokesperson for Gyeonggi Province, is giving a briefing.

[Asia Economy (Suwon) = Reporter Lee Young-gyu] Gyeonggi-do will designate and operate land transaction permission zones to prevent foreigners and corporations from indiscriminately purchasing real estate using massive funds. The province plans to finalize and announce the permitted areas as early as October. However, it has decided not to regulate sales within those areas.

On the 3rd, the province announced that since foreigners and corporations with substantial financial power have already become major players in the land and housing markets, fueling real estate price increases, it has judged that strong and effective measures are urgently needed to stabilize the real estate market. Therefore, it will introduce and operate a land transaction permission system targeting these groups.

This measure by the province comes amid a surge in real estate transactions by foreigners and corporations, with a judgment that a significant portion of the acquired properties are for speculative purposes rather than for business use or actual residence.

In fact, from January to July this year, corporations acquired a total of 9,580 apartments in the province. This is a staggering 370% increase (7,544 units) compared to 2,036 units during the same period last year. The number of buildings such as apartments, commercial buildings, and villas acquired by foreigners from January to July was 5,423 units, a 32% increase (1,338 units) compared to 4,085 units in the same period last year.

Data from the National Tax Service supports this judgment by the province.

In April, the National Tax Service announced that the establishment of real estate corporations is rapidly increasing and that it would conduct tax investigations after detecting many real estate corporations set up to evade speculative regulations on multi-homeowners or to gift high-priced apartments to children.

The situation is similar for foreigners. According to the National Tax Service on the 3rd of last month, 1,036 foreigners acquired two or more apartments in Korea from 2017 to May 2020. Among them, there was a foreigner who acquired 42 apartments (with an acquisition amount of 6.7 billion KRW). Furthermore, when checking whether foreign owners actually reside in their apartments, out of a total of 23,167 acquired apartments, 7,569 units (32.7%) were not occupied by the owners.

Accordingly, the province plans to carefully review areas centered on speculative overheating zones and select and announce specific foreigner and corporation land transaction permission zones, including the target areas and criteria for permitted area sizes, as early as October.

Although designated as land transaction permission zones, the province plans to require only foreigners and corporations within these zones to obtain permission from the respective market or county heads for real estate acquisitions.

Violations will be subject to imprisonment of up to two years or fines up to 30% of the land price.

Kim Hong-guk, the provincial spokesperson, explained during a non-face-to-face briefing that "If land transaction permission were applied to all residents, including nationals, across the entire Gyeonggi-do area, it would impose a heavy administrative burden on government agencies and could cause a balloon effect, concentrating demand in Seoul and Incheon areas. Considering this, the regions and applicable subjects have been limited to avoid inconveniencing normal residential housing transactions by nationals."

The province expects that, given the characteristics of the land transaction permission system?where acquisition is allowed only for genuine demanders and there is an obligation to use the land for the permitted purpose for 2 to 5 years?there will be an effect of blocking speculative demand by foreigners and corporations within the permission zones.

This content was produced with the assistance of AI translation services.