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A wide-angle view of Seoul, South Korea. Photo by Pixabay |
The government aims to cool down the soaring housing market, especially in Seoul and its neighboring cities, where property purchases by foreigners have been driving up prices in the market’s middle and high-end segments, South China Morning Post reported.
According to Chosun Daily, as of May, buyers from mainland China and Hong Kong had acquired 96,955 properties in South Korea, a 78.5% increase from 2020. These properties include residential units, commercial properties and land.
“We anticipate the ban will contribute to market cooling, price stabilisation, and improved access for local buyers, to some extent, as domestic buyers face strict mortgage caps, whereas foreign buyers often circumvent these through overseas financing,” said JoAnn Hong, senior director for research and consultancy at Savills Korea.
The new restrictions, which came into effect last month, is the latest effort from the government to battle speculation in the housing market, which has become a political issue for President Lee Jae-myung, as he pledged to ease living costs when he took office in June.
Before the policy was rolled out by the Ministry of Land, Infrastructure and Transport, South Korea ranked as the ninth most popular destination for Chinese property investors, according to data compiled by real estate broker Juwai IQI.
Foreign buyers accounted for approximately 20% of residential transactions in the middle and upscale home segments, particularly in the Seoul metropolitan area, which includes Incheon and Gyeonggi province, according to Hong from Savills. Since 2022, foreign buyers have been particularly active in purchasing high-end homes in these areas.
“By the end of last year, foreigners owned just over 100,000 homes in Korea, and more than 56% of those were owned by Chinese nationals,” Paik said. “In Seoul, specifically, it’s even more pronounced, roughly seven out of 10 foreign buyers are Chinese.”
Chinese investors’ focus on Seoul has been a “big driver in prime districts”, often purchasing properties with cash or through offshore financing. This has added significant pressure to the upper end of the market.
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An aerial view of Seoul, South Korea. Photo by Pexels |
According to the new rule, foreign buyers must now comply with a residency rule, which requires them to live in the property they purchase.
The land ministry’s policy mandates that foreigners obtain prior approval to purchase a property. Once approved, they must move into the property within four months of receiving permission and remain there for at least two years after the purchase.
Despite the policy change, some experts remain skeptical about its impact on housing prices in the country.
Christine Li, head of research for Asia-Pacific at Knight Frank, pointed out that foreign home buying has not significantly impacted South Korea’s home prices, particularly in Seoul.
“The extraordinary price growth seen over the past five years was overwhelmingly driven by domestic factors,” Li said. “Foreign transactions are too small in scale to meaningfully influence overall pricing trends, though their activity can feel more visible in a handful of high-end districts.”
Li also mentioned that demand in Seoul will remain strong, and supply shortages are unlikely to slow down price increases.
Seoul has topped a ranking of prime residential price growth among 46 cities globally, with a 25.2% annual price gain, according to a Knight Frank study released last month, suggesting that the property prices will continue to rise in the coming time.
