Starting February 10 next year, if a foreigner acquires a house in a designated land transaction permission area in Korea, they will need to submit a funding plan and verification documents during the transaction report. The Ministry of Land, Infrastructure and Transport announced the revision of the Real Estate Transaction Reporting Act enforcement ordinance with these details today (9th).
Previously, the Ministry designated most regions in the metropolitan area, including Seoul, as land transaction permission areas for foreigners last August. This was due to criticisms that foreigners were inflating housing prices by purchasing expensive real estate for speculative purposes without actually living there, using unverified funds from their home countries and bypassing local loan regulations.
The targeted areas include the entire city of Seoul, 23 cities and counties in Gyeonggi Province excluding Yangju, Icheon, Uijeongbu, Dongducheon, Yangpyeong, Yeoju, Gapyeong, and Yeoncheon, and 7 districts in Incheon City excluding Dong-gu, Ganghwa-gun, and Ongjin-gun.
Starting August 26, foreigners who wish to trade residential properties, including apartments, within land transaction permission areas must reside there for at least two years.
This ordinance revision is a follow-up to the designation of land transaction permission areas for foreigners announced in August. It aims to scrutinize speculative elements more closely when foreigners engage in real estate transactions in Korea.
The revised ordinance includes a clause requiring foreign buyers to provide information on their ‘residency status’ and ‘address and residence for more than 183 days’ in transaction reports. Through this, illegal real estate activities by foreigners, such as unauthorized leasing and tax evasion, can be prevented in advance, and the appropriateness of trustee management reports, which may be viewed as non-resident foreigner property transactions, can be reviewed promptly.
Additionally, foreign real estate transactions within designated permission areas will require submission of a funding plan and verification documents. Details about funds sourced from abroad, such as foreign loans or savings, the names of foreign financial institutions, as well as domestic financing details like assumption of deposits and business-purpose loans, must be specified.
According to the Ministry, this will enable quicker and clearer transaction investigations to prevent market disturbance and the levying of taxes to ensure fair taxation.
Park Joon-hyung, the land policy officer at the Ministry of Land, stated, “This ordinance revision lays the institutional foundation to prevent real estate speculation by foreigners,” adding, “it will proactively prevent speculative activities by foreigners and help establish a transaction order centered on real demand, contributing to housing price stability.”
Meanwhile, following the designation of land transaction permission areas for foreigners, foreign housing transactions in the metropolitan area numbered 1,080 from September to November, a 40% decrease compared to the same period last year. By region, the transaction volume was 16.6% in Seoul, 66.1% in Gyeonggi, and 17.3% in Incheon, with the most significant drop of 49% (353 cases to 179 cases) observed in Seoul.
The Gangnam 3 districts (Seocho, Gangnam, Songpa) and Yongsan-gu, which had already been designated as land transaction permission areas for apartments, saw a 48% decrease in foreign housing transactions compared to the same period last year. By nationality, 72% of transactions were by Chinese, 14% by Americans, and 3% by Canadians, with a year-over-year transaction decrease of 39% for China and 41% for the U.S. Furthermore, among foreign housing transactions in the metropolitan area over the past three months, the number of trustee designations was one case in Gyeonggi, a 98% decrease from 56 cases during the same period last year.