Tag: seoul

In a bid to temper the escalating housing market, the South Korean government has stepped in, targeting particularly the vibrant skyline of Seoul and surrounding regions. The surge in property purchases by foreign buyers, especially from mainland China and Hong Kong, is significantly inflating the prices of middle and high-end homes, according to a report from the South China Morning Post.

Data reveals a staggering rise in acquisitions: as of May, 96,955 properties have shifted hands to buyers from these territories, marking a dramatic 78.5% increase since 2020. These transactions encompass residential units, commercial spaces, and land, highlighting a trend that has not gone unnoticed by local officials.

“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,” commented JoAnn Hong, senior director for research and consultancy at Savills Korea.

This new wave of restrictions, implemented recently, represents the government’s latest effort to tackle rampant speculation in the housing sector, an issue that has become politically charged for President Lee Jae-myung, who promised to alleviate living costs upon assuming office in June.

Prior to this regulatory shift by the Ministry of Land, Infrastructure and Transport, South Korea had emerged as the ninth most sought-after destination for Chinese property investors, as reported by real estate broker Juwai IQI.

Data indicates that foreign buyers constituted approximately 20% of residential transactions in the middle and upscale segments, particularly in and around the Seoul metropolitan area, which encompasses Incheon and Gyeonggi province. Notably, there has been a significant uptick in foreign investments in high-end properties since 2022, according to Savills’ findings.

By the end of last year, foreigners owned just over 100,000 homes in South Korea, with Chinese nationals accounting for more than 56% of this figure. In Seoul, the influence is even more striking, with about 70% of foreign buyers hailing from China.

This influx of Chinese investors has been a notable driver in the prime districts, frequently purchasing properties with cash or via offshore financing, thereby intensifying pressure on the upper end of the real estate market.

The newly instituted rules stipulate that foreign buyers must now comply with a residency requirement, mandating that they reside in any property purchased. Specifically, the land ministry’s policy dictates that foreigners obtain prior approval and, once granted, must move into their new home within four months and remain there for at least two years.

Despite these changes, skepticism lingers among experts regarding the potential effectiveness of the policy in striking a blow against soaring housing prices. Christine Li, head of research for Asia-Pacific at Knight Frank, expressed reservations, noting that foreign investment alone has had minimal impact on overall real estate prices in South Korea, 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 added that demand will likely remain robust in Seoul despite the constraints, with supply shortages keeping upward pressure on prices. In a striking twist, Seoul has topped global rankings for prime residential price growth among 46 cities, boasting a staggering 25.2% annual increase, as highlighted in a recent Knight Frank study. This suggests that the city’s property prices are set to continue their upward trajectory in the foreseeable future.