One Person Sweeps Up 45 Properties... Government Conducts First 'Planned Investigation' into Foreign Real Estate Speculation

[Image source=Yonhap News]

First Planned Investigation into Speculative Real Estate Transactions by Foreigners

1,145 Suspicious Transactions Including Up-Down Contracts and Evasive Gifts Targeted

'Transaction Permission Zones' to be Designated if Speculation Concerns Arise

[Asia Economy Reporter Kim Min-young] The government is launching a planned investigation into real estate transactions by foreigners. As housing-related regulations such as loans have been tightened, concerns about reverse discrimination between domestic and foreign buyers have been raised, prompting stricter management of foreign real estate transactions.

The Ministry of Land, Infrastructure and Transport announced on the 23rd that it will conduct a planned investigation into speculative real estate transactions by foreigners in cooperation with related agencies such as the Ministry of Justice, National Tax Service, and Korea Customs Service.

According to the Ministry of Land, the number of housing transactions by foreigners accounts for less than 1% of total transactions. However, the number of purchases has steadily increased during the recent housing price surge. Abnormal signs continue to be detected, such as foreigners accumulating houses (up to 45 units per person), purchases by minors (minimum age 8), and a high rate of direct transactions (47.7% of transactions among foreigners).

This planned investigation will first target 1,145 suspicious speculative transactions, including up-down contracts, name trusts, and evasive gifts, among 20,038 nationwide 'housing' transactions (including pre-sale rights) conducted from 2020, when foreign transaction volume surged, through May of this year. Considering the special nature of foreigners, the investigation will be conducted in cooperation with the Ministry of Justice, which holds information on residency status and addresses, and the Korea Customs Service, which monitors illegal foreign exchange transactions.

Suspected illegal activities identified will be reported to related agencies such as the National Tax Service, Financial Services Commission, and local governments for tax evasion and loan analysis, and imposition of fines. In particular, violations of the Foreign Exchange Transactions Act and Immigration Control Act, such as illegal inflow of overseas funds or leasing real estate with unauthorized visas, will be reported to the Korea Customs Service and Ministry of Justice for strict action. This investigation will continue until September this year, with results to be announced in October.

Going forward, the government plans to expand the investigation to include 'land' transactions by foreigners, establish a continuous monitoring system for foreign speculation, and conduct additional investigations if abnormal trends are detected.

Additionally, the Ministry of Land plans to actively pursue institutional improvements, including establishing a response system for speculative real estate transactions by foreigners and organizing related statistics. Noting the limitation in detecting speculation due to the lack of statistics on foreign housing ownership, the ministry plans to produce foreign housing ownership statistics starting next year by linking Supreme Court building registration data, building registers, and actual transaction data.

Furthermore, to resolve unclear residency qualifications for foreigners eligible to register as rental business operators, a revision of the Special Act on Private Rental Housing will be pursued within this year to clearly specify visa types eligible for rental business registration.

Considering the characteristics of foreigners with unclear residences, to ensure the effectiveness of the investigation, institutional improvements such as mandatory designation and reporting of domestic entrusted managers upon acquisition of real estate by non-resident foreigners and expansion of submission requirements for funding plans will be reviewed. Various sanctions, including restrictions on entry and exit for foreigners found engaging in illegal activities, will also be considered.

Jin Hyun-hwan, Director of Land Policy, said, "This planned investigation of actual transactions will serve as an opportunity to review the management system for foreign real estate transactions to stabilize the real estate market and resolve controversies over reverse discrimination against domestic buyers. Along with the investigation, we will promptly pursue institutional improvements to regulate speculative transactions by foreigners and actively respond by closely examining any necessary supplements."