Even 'Big-Spending' Chinese Buyers Avoid... Real Estate Purchases Decline for 3 Consecutive Months

Interest Rate Freeze, Political Instability, and Alternative Investments
Even Foreign Buyers Are Taking a Wait-and-See Approach

This year, the number of foreigners shopping for apartments in South Korea has sharply declined. In particular, the purchasing power of Chinese buyers, who are considered major players in the real estate market, has significantly decreased. Analysts suggest that as uncertainty grew due to the economic downturn and political instability, even foreigners have turned cautious and adopted a wait-and-see approach.

According to the 'Status of Buyers Applying for Ownership Transfer Registration by Sale' from the Court Registry Information Plaza on the 12th, 634 Chinese nationals applied for ownership transfer registration after purchasing domestic real estate (including collective buildings, land, and buildings) last month. This represents a 32% decrease compared to the same month last year (928 people). The number of Chinese buyers has been declining for three consecutive months, from 1,031 in October last year to 909 in November and 755 in December. Compared to the monthly average of around 1,000 last year, the contraction in purchasing power is evident.

◆Even Chinese Buyers Say "We Are Not Buying Apartments"= Experts attribute the decline in purchasing power to uncertainty. The real estate market downturn, interest rate freeze, and political instability have dampened foreign investment sentiment. Ko Jong-wan, president of the Korea Asset Management Research Institute, explained, "The real estate market showed an upward trend from March to September last year but entered a downward adjustment phase after October," adding, "The decline in Chinese purchases coincides with this period." He continued, "The impeachment political situation increased economic uncertainty in Korea, and the market itself is in a slump. Expectations for interest rate cuts were unmet as rates were frozen, which also affected the price adjustment phase in the Seoul metropolitan area, including Gyeonggi Province."

There was also an impact from the perception that better investment opportunities exist outside the domestic real estate market. As preference for financial investment assets such as the U.S. stock market increased, interest in domestic real estate waned. Park Won-gap, senior specialist at KB Kookmin Bank, said, "With recent changes in global investment trends, investors are moving funds to U.S. stocks like Nvidia and Tesla," adding, "Chinese investors tend to be selective and cautious, and since there is no clear expectation of price increases in the Korean real estate market, they seem hesitant to buy."

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◆More Cautious End-Users= Among foreigners, end-users have also turned cautious. Foreigners buying homes in South Korea can be broadly divided into investors and end-users. Investors include those who previously invested in Jeju Island seeking visa benefits through real estate investment immigration programs or those who purchase high-priced homes in prime areas of Seoul. End-users are those who find jobs in South Korea and settle in areas like Guro in Seoul or Ansan City, subsequently buying homes. Experts believe that the slowdown in end-user activity has led to a decrease in transactions. The impact of end-users, who are sensitive to housing prices, adopting a wait-and-see stance is significant.

Foreign investment is still active in the Gangnam area. President Ko said, "Gangnam, Yeouido, Mok-dong, and Mayongseong (Mapo, Yongsan, and Seongdong districts) are areas with steady investment demand," adding, "Especially in Gangnam, many Chinese buyers utilize investment loans."

Senior specialist Park explained, "Foreign investment in the domestic real estate market tends to be collective, but recently, multi-homeowners are reluctant to make additional purchases, and gap investments are almost nonexistent." He added, "The current main trend in the market is early 40s end-users moving to higher-tier areas, but the atmosphere of owning two or more homes has disappeared," analyzing, "Chinese buyers are showing similar trends to domestic demanders."