Lending regulations? Foreigners kept buying
Foreigners avoid lending regulations... Need to prevent reverse discrimination
Following the June 27 measures, the number of home purchases by foreigners has surged. This is analyzed as a result of foreigners, who are not subject to lending regulations, engaging in speculative buying amid persistent expectations of rising housing prices. In response, the National Assembly and other institutions are considering measures to require foreigners to obtain approval for real estate transactions, aiming to put the brakes on foreign real estate purchases.
Lending regulations? Foreigners kept buying
According to the Court Registration Information Plaza on July 21, the number of foreigners who applied for ownership transfer registration for collective buildings in Seoul (including officetels, apartments, multiplex housing, and multi-family housing) from July 1 to 17 was counted at 114. This represents a 17.5% increase compared to 97 during the same period last month.
In contrast to the increase in real estate purchases by foreigners, the number of major buyers such as domestic individuals and corporations saw a sharp decline. The number of domestic buyers dropped by 30.1%, from 9,950 to 6,959. The number of corporations plunged by 58.6%, from 915 to 379.
By nationality, Chinese buyers accounted for the largest share among foreigners purchasing real estate, with 54 individuals. They were followed by 33 from the United States and 8 from Canada. The number of Chinese buyers increased by 14 (35%) from 40 during the same period last month. The number of American buyers also rose by 6 (22.2%), from 27 to 33.
Since the beginning of this year, the number of foreigners purchasing collective buildings in Seoul has been on the rise. In January, the figure stood at 110, but it nearly doubled to 204 by May. Although the number slightly decreased to 198 last month, it still remained close to 200.
Foreigners avoid lending regulations... Need to prevent reverse discrimination
Despite the growing number of foreigners purchasing real estate in Seoul, the government has yet to take any significant action. Under the June 27 lending regulations, the mortgage loan limit for domestic buyers in the Seoul metropolitan area was capped at 600 million won. However, foreigners were not included in the scope of these regulations. As a result, while domestic transactions were directly hit by lending restrictions, foreigners avoided the regulations and their transaction volume increased. Foreign buyers can also secure funds from overseas banks that are not subject to Korean government regulations.
Amid growing controversy over 'reverse discrimination' against domestic buyers regarding foreign real estate purchases, the National Assembly has recently begun to take action. Bills have been proposed to switch foreign real estate transactions from a reporting system to a permit system. Lee Unju, a lawmaker from the Democratic Party, proposed a partial amendment to the Act on Report of Real Estate Transactions, which would require foreigners to obtain prior approval when entering into contracts to acquire domestic real estate and to meet a requirement of residing for more than three years after purchasing a home. Kim Mi-ae, a lawmaker from the People Power Party, also proposed a similar amendment. Kim's bill stipulates that foreigners must obtain prior approval from the mayor, county governor, or district head when acquiring land in speculative or regulated areas. The Seoul Metropolitan Government also plans to strengthen its management system for foreign real estate transactions, including verifying funding sources and conducting detailed investigations into suspicious transactions. In addition, the city government will conduct on-site inspections to verify actual residence for foreign buyers in autonomous districts and land transaction permit zones.
Park Wongap, chief real estate expert at KB Kookmin Bank, said, "It is excessive to prohibit foreigners from buying homes for residential purposes," but added, "There is a need to put a brake on purchases made for gap investment (buying with a tenant in place), and a permit system requiring at least two years of residence before being allowed to sell the property could be one solution."
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