'Regulation-Free' Foreigners, Record High Domestic Building Sales Last Year

The view of downtown apartments from Namsan, Seoul, on the 2nd.

Last year, as housing prices soared, the volume of real estate transactions by foreigners in South Korea also reached an all-time high. In particular, the proportion of foreign buyers in the Gangnam 3 districts of Seoul increased.

According to the Korea Real Estate Board on the 3rd, between January and November last year, the number of foreign transactions involving buildings (including detached houses, multi-family houses, apartments, and commercial officetels) in South Korea totaled 19,705. This figure represents a 2.91% increase compared to the same period in 2020, when the previous record of 19,147 transactions was set. Foreign transactions include cases where either the buyer or the seller is a foreigner.

Foreign transactions were concentrated in the metropolitan area. There were 3,623 transactions in Seoul, 3,652 in Incheon, and 7,168 in Gyeonggi Province, totaling 14,443 transactions in the metropolitan area. This accounts for about 70% of all transactions. Notably, in Seoul, the share of purchases in the Gangnam 3 districts significantly increased. Of the 3,623 transactions in Seoul, 23.3% were in the Gangnam 3 districts, up 3.7 percentage points from 19.6% in the same period the previous year.

Despite the contraction of the domestic real estate market since the second half of last year, foreign transactions of buildings remain active, suggesting that controversies over reverse discrimination are likely to intensify this year.

For domestic residents, when purchasing apartments in regulated areas such as Seoul, loans are limited to a maximum of 40% of the housing price. For properties exceeding 1.5 billion KRW, loans are not available at all. Although these restrictions apply to foreigners residing in South Korea when obtaining loans from domestic banks, they do not apply if the loan is obtained from their home country or abroad. Additionally, foreigners fall into blind spots regarding various heavy taxes such as capital gains tax and comprehensive real estate tax because it is difficult to identify household members.

In the political arena, there were attempts to revise laws to impose heavier acquisition and capital gains taxes on foreign housing transactions, but these were all discarded last year due to concerns that they might violate the principle of reciprocity under international law.

In December last year, the government announced plans to strengthen monitoring of illegal real estate acquisitions by foreigners. The Bank of Korea will collect monthly reports on foreign real estate acquisitions and deliver them to the Korea Customs Service, and a related information cooperation system is scheduled to be established by March this year. Furthermore, to detect cases where foreign multi-homeowners disguise themselves as single-homeowners, the government plans to conduct research and produce statistics to understand the status of foreign real estate transactions and holdings this year. However, industry experts point out that these measures alone are insufficient to curb speculative real estate investments by foreigners in South Korea.

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