South Korea will impose sweeping restrictions on foreign property transactions across the Seoul metropolitan area, citing concerns over speculative buying by overseas investors that has intensified following a tightening of mortgage rules for domestic buyers.
The Ministry of Land, Infrastructure and Transport said on Thursday that foreigners will be required to obtain government approval before purchasing homes in Seoul and its surrounding areas – its most sweeping effort yet to curb speculative inflows of overseas money into the property market.
The ministry designated almost the entire capital region, including Seoul, 23 cities and counties in Gyeonggi Province and seven districts of Incheon, as the foreign land transaction permit zone from Aug. 26.
The measure, which will initially run for one year, means foreign individuals, corporations and even governments must seek prior approval from local authorities before acquiring land plots larger than six square meters.
Under the new rules, foreign buyers must move in within four months of purchase and reside in the property for at least two years. Those who fail to comply risk repeated fines of up to 10% of the property’s value and, potentially, cancellation of their purchases, the ministry said in a statement.
Speculative property trading among foreigners rises in Korea FOREIGNERS CIRCUMVENTING RULES
Officials said the step was prompted by evidence that foreigners were increasingly circumventing Korea’s stringent mortgage curbs, introduced under the government’s June 27 housing package, which capped household mortgage loans at 600 million won ($439,000).
While domestic buyers are now subject to stricter lending limits, foreign purchasers have continued to acquire high-end apartments using overseas financing, fueling complaints of unfair treatment and stoking market tensions.
“Recent capital inflows from abroad, coupled with Korea’s tightened mortgage restrictions, have raised risks of speculative transactions by foreigners,” the ministry said.
SCRUTINY OF FUNDING SOURCES
The government also pledged to tighten scrutiny of funding sources, a move aimed at blocking foreigners from tapping overseas credit to acquire Korean property.
Buyers will be obliged to submit detailed financing plans and supporting documents, while regulators will examine visa types and overseas fund flows.
Foreigners walk in Myeong-dong, a favorite spot for travelers in Seoul Suspicious cases will be reported to the Korea Financial Intelligence Unit (FIU), which can share information with foreign tax authorities.
“This measure is designed to prevent speculative foreign capital inflows and to stabilize house prices, thereby contributing to housing welfare for our citizens,” said Lee Sang-kyung, first vice land minister.
FOREIGN HOUSING DEALS ON THE RISE
Currently, foreigners are allowed to designate local property managers instead of living in Korea, a mechanism the government believes is often used to conceal speculative purchases.
Since August 2023, 497 homes in the capital region have been bought through this route, more than 60% by US nationals and about 22% by Chinese nationals.
DL E&C's apartment complexes Transaction data highlights the trend.
Foreign housing deals in the Seoul metropolitan area stood at 4,431 in the first seven months of this year, and are on course to hit nearly 7,600 by year-end. Such deals steadily increased from 4,568 in 2022 to 6,363 in 2023 and 7,296 in 2024.
In Seoul, activity has picked up sharply since the June rules came into effect: deals in Gangnam, Seocho, Songpa and Yongsan districts surged to 29 last month from 10 in June.
Some of these purchases have set record prices.
In April, a US national bought a 240-square-meter apartment in Seoul’s Hannam district for 12 billion won ($8.7 million), marking a new high for the building.
A Maltese buyer in March acquired a luxury villa in Gangnam for 7.4 billion won.
Apartment complexes in Seoul EXCEPTIONS FOR GIFTS, INHERITANCE, COURT AUCTIONS, OFFICETELS
The new restrictions apply to apartments, multi-unit homes and detached houses but exclude gifts, inheritance, court auctions and officetels, a type of studio apartment popular with investors.
Foreign buyers must submit supporting documents within 30 days of purchase to confirm compliance.
Some parts of Gyeonggi and Incheon, with minimal foreign buying, including Yangju, Icheon, Yeoncheon, Incheon Dong-gu district, Ganghwa, and Ongjin, have been excluded from the designation.
Across the country, foreign ownership of Korean housing has also been steadily rising.
As of end-2024, Chinese nationals accounted for 56,301 units, more than any other nationality, followed by Americans with 22,031, Canadians with 6,315 and Taiwanese with 3,360 houses, according to government data.
Write to In-Soo Nam at isnam@hankyung.com Jennifer Nicholson-Breen edited this article.
