Chinese Buyers Sweeping Up Real Estate... Received Tens of Billions in Loans Unavailable to Koreans

Purchased Buildings with Over 60% of Housing Price Financed by Domestic Banks
From 0 Cases in 2018 to a Surge of 187 Cases Last Year

Cases of foreigners obtaining large loans from domestic banks to purchase commercial residential buildings are increasing. The photo shows a real estate agency in the Mapo-gu area of Seoul.
[Image source=Yonhap News]

[Asia Economy Reporter Lim Juhyung] Cases of purchasing buildings by borrowing more than 60% of the housing price from domestic banks in overseas countries such as China are increasing. As there are concerns that a significant increase in foreign nationals' domestic real estate purchases could affect housing prices, voices calling for regulation on this matter are emerging in the National Assembly.

According to the office of Assemblyman So Byung-hoon of the Democratic Party on the 2nd, last October, a Chinese national, Mr. A, borrowed 1.25 billion KRW from a domestic bank to purchase a commercial residential building located in Mangwon-dong, Mapo-gu, Seoul.

According to Assemblyman So's office, the price of the house purchased by Mr. A was 1.6 billion KRW, and Mr. A covered about 78% of the total housing price with funds from a domestic bank. In particular, Mr. A already owns one house in Korea, and the Mangwon-dong commercial residential building was reportedly purchased for rental purposes.

In addition, cases of foreigners borrowing large sums from domestic banks to purchase houses have been confirmed. Chinese national Mr. B reportedly purchased a commercial residential building located in Itaewon-dong, Yongsan-gu, Seoul for 7.8 billion KRW, receiving a loan of 5.9 billion KRW.

Previously, since 2018, the government has prohibited mortgage loans (housing mortgage loans) for purchasing high-priced houses over 900 million KRW in speculative overheated districts unless for actual residence purposes. However, commercial buildings or commercial residential buildings can receive loans ranging from 60% to up to 80% of the appraised price.

On the afternoon of the 17th of last month, urban apartments can be seen at the Korea International Trade Association in Gangnam-gu, Seoul. / Photo by Yonhap News

Among these, it has been confirmed that cases of foreigners borrowing more than 60% of the total housing price from domestic banks and then purchasing real estate are increasing. Previously, there were zero cases in 2018, only one case in the following year (2019), but last year, it sharply increased to 187 cases.

As a result, concerns have been raised that a surge in foreign nationals' domestic real estate purchases could lead to housing price increases. Regarding this, Assemblyman So pointed out, "Recently, the proportion of residential building transactions in building transactions has decreased, while the proportion of commercial office building transactions has increased, expanding the share of commercial office real estate purchases where real estate loan regulations are not strict."

As a countermeasure, Assemblyman So announced on the 2nd that he has taken the lead in proposing the "Foreigners' Real Estate Mortgage Loan Prohibition Act." The bill mainly restricts foreigners without domestic income within two years from the loan application date from receiving real estate mortgage loans.

It also includes provisions requiring banks to apply the same loan regulations to commercial office real estate as to residential properties.

Assemblyman So explained about the bill, "If the Banking Act is amended in this way, it will be virtually impossible to borrow tens of billions of won from domestic banks to purchase real estate, as in the previous cases of Chinese nationals," adding, "As foreign nationals' domestic real estate purchases are increasing, the government needs to introduce appropriate regulations."

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