Sometimes Sold Billions Cheaper Than Market Price... Wangseobang Leaving Korean Real Estate

Chinese Buyers of Domestic Real Estate
28% Decrease Compared to Last Year
Interest Rate Hikes and Housing Market Slump
Loss of Appeal as Investment Destination

The Bank of Korea raised the base interest rate by 0.5 percentage points, and the real estate transaction market is expected to experience a prolonged winter. On the 13th, a red light was on at a traffic signal near an apartment in downtown Seoul.

[Asia Economy Reporter Kim Min-young] The purchasing power of Chinese buyers, who actively acquired domestic real estate during the housing price surge, has dropped to one-third compared to last year. This is attributed to the loss of attractiveness as an investment destination due to reduced liquidity from interest rate hikes, a domestic housing market downturn, and the government's strict enforcement policy against foreign real estate speculation. Cases of Chinese sellers engaging in 'panic selling' by offering properties several hundred million won below market prices have also emerged, acting as a major factor rapidly pulling down surrounding market prices.

According to the Court Registry Information Plaza on the 28th, the number of Chinese buyers who purchased domestic real estate (including buildings, land, and collective buildings) based on ownership transfer registration applications from the beginning of this year until last month was 8,945, a 28% decrease compared to 12,437 last year. The proportion of Chinese buyers among foreign real estate purchasers also slightly declined to 64% from 66% last year. Chinese buyers have held the highest proportion among foreign buyers of domestic real estate for ten consecutive years.

Chinese purchases of domestic real estate increased significantly in line with the housing price rise. Since 2018, when housing prices began to rise gradually, the number of Chinese real estate purchases in Korea exceeded 10,000 annually, reaching 13,416 in 2020 when liquidity flooded the market due to the COVID-19 pandemic.

According to the Ministry of Land, Infrastructure and Transport, there have been cases such as an 8-year-old Chinese child purchasing an apartment in Gyeonggi Province, and a Chinese female student who entered Korea on a student visa buying two villas in Incheon and receiving a monthly rent of 900,000 won, showing that Chinese real estate purchases in Korea have been active regardless of age.

Not only Chinese buyers but also foreign buyers' real estate purchases in Korea have slowed down this year. Up to November this year, 13,923 foreigners purchased domestic real estate, a 20% decrease from 17,414 during the same period last year.

With countries including the United States tightening monetary policies through interest rate hikes, funding capacity has decreased, and foreigners, considering the possibility of further housing price declines amid the domestic housing market downturn, seem reluctant to invest in Korean real estate. Additionally, the Ministry of Land, Infrastructure and Transport's announcement to intensively crack down on foreign speculative activities, following controversies over perceived reverse discrimination as foreigners were previously exempt from various real estate regulations such as mortgage restrictions and increased acquisition, holding, and capital gains taxes on multiple homeowners, is also cited as a main reason for the decline in foreign real estate investment.

In particular, Incheon was an area where foreign buyers, including Chinese, were actively purchasing real estate. However, it has become one of the regions with the steepest housing price declines this year, and foreign buying activity has disappeared. From January to November this year, 2,569 foreigners applied for ownership transfer registration after purchasing real estate in Incheon, a 16.9% decrease from 3,093 during the same period last year. During the same period, the number of Chinese buyers applying for ownership transfer registration in Incheon dropped from 2,475 to 1,932.

As the domestic housing market worsened, Chinese homeowners who held properties for a short period and sold them several hundred million won below market prices have also appeared. According to the Ministry of Land, Infrastructure and Transport's real transaction disclosure system, on the 18th of last month, a 106.78㎡ (39th floor) unit in Songdo Artwin Prugio, Songdo-dong, Yeonsu-gu, Incheon, was traded for 900 million won. This is 695 million won lower than the previous highest price of 1.595 billion won. Considering that the current asking prices for the same size range from 1.1 to 1.7 billion won, this transaction caused the market price to plummet instantly. The seller, Mr. A, a Chinese in his early 30s, purchased the property in July last year through an agent for 1.595 billion won in full cash. He then signed a lease contract in April this year with a deposit of 10 million won and monthly rent of 2.8 million won but sold the property six months later.

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