Bo-eun leads the digital content team. She has covered foreign affairs, North Korea, tech, economy and gender issues at The Korea Times. She did a short stint at the South China Morning Post in Hong Kong, where she obtained a new perspective on news production and life. Small sources of joy for her are lounging in the sun, having a good latte and swimming.
Immigrant investor program to boost Busan's property market
David Choi is general manager of Cushman & Wakefield Korea’s Busan office.
By Kim Bo-eun
The possibility of Busan adopting an “Immigrant Investor Program” is focusing nationwide attention on the port city amid the sluggish real estate market. If the program starts, Busan will become the fifth city to operate the program in Korea.
Investment in real estate by foreigners was allowed after the Asian financial crisis in 1998 to boost the property market and invite foreign capital. Foreigners have equal rights as local residents to acquire land and are subject to the same regulations as those for domestic investors under certain legal boundaries such as the Foreigner’s Land Acquisition Act, the Foreign Investment Promotion Act and the Foreign Exchange Transaction Act. Beginning with Jeju Special Self-Governing Province in 2010, the Immigrant Investor Program following the Immigration Control Act has served as a momentum to widely open the chance for foreigners to obtain property in Korea and invest more here.
Korea’s Immigrant Investor Program currently gives a residential qualification (F-2) and awards the right of permanent residency (F-5) with a five-year stay condition to foreigners, who purchase a property valued above a certain amount in some areas such as Jeju, Pyeongchang, Yeosu and the Incheon Free Economic Zone.
Lately, the Ministry of Justice made an official announcement of revised criteria that it would reduce the minimum investment requirements from this May for the next five years — for example, from 1 billion to 500 million won in Pyeongchang and from 1.5 billion to 700 million won in Incheon. On the other hand, in Jeju and Yeosu the minimum investment amount remains unchanged at 500 million Korean won.
It appears that the government is trying to invigorate direct investment by foreigners by halving the investment requirement under the circumstances of low direct investment performances in all areas except Jeju. This move is expected to make it easier for foreigners who invest directly in Korea to obtain a residential visa and Korea might also be viewed as more open to foreigners.
According to the ministry, the program is especially beneficial for those who buy hotel units at LCT, Haeundae Tourist Resort. It is expected that the minimum amount of investment requirement for this type of real estate investment will be around 1 billion won based on a recent downward revision of the other areas. But, since Busan and Jeju are geographically close and have sought to become the center of marine tourism, the minimum requirement is expected to be set at around 500 million won in pursuit of fairness for both areas. If the government goes ahead with applying a 500 million won minimum investment in the LCT business, then other businesses such as hotels, recreational condos, resorts, pensions and vacation homes in the East Busan Tourism Complex could also benefit from the program. If so, it would be another milestone for the development of the real estate market in Busan.
The amount of foreign capital and scale of investment in Busan have been increasing steadily even without the Immigrant Investor Program. Recently, one Chinese capital company submitted a letter of intention to invest 1.2 trillion won in LCT and a residential suite hotel called “Aratrium” in Marine City. Busan invited prospective end-users from China and Hong Kong and actually closed several deals with them. SEGA-SAMMY Holdings, based in Japan, decided to construct mixed-use buildings as a landmark with 39 stories and seven underground levels in the Centum City area of Busan by 2016. Duplex Group, famous for brand residential services in Japan, opened their main office in Korea in the Haeundae District of Busan. It is planning to expand within Korea. Also, the Long Stay Foundation, which supports Japanese living in Busan, is determined to open low-priced accommodation facilities near Haeundae and increase the number of Japanese investors.
It is obvious that Busan’s unique local attractions, such as its natural environment, mountain range, coastline and four distinct seasons as well as highly developed social infrastructure including medical care, leisure, living and shopping facilities, would more than qualify Busan to be a suitable candidate city to expand the Immigrant Investor Program in Korea. Especially, moving more foreign real estate investment into Busan in the midst of the current recession would be a very positive step to increase foreign capital investment and more importantly revitalize the local economy.
But, it is essential for the government to prepare a proper real estate related policy for foreigners before the Immigrant Investor Program comes into effect in Busan.
First of all, it is vital to establish a solid investment climate not only for the influx of Chinese and Japanese investors but also for investors from countries such as Russia, Malaysia, Singapore, the U.S. and European countries. Needless to say, any speculations should be prevented so we can promote the activation of the regional economy in a progressive way. Through this process, we should look at both sides of the coin and make well-balanced decisions on how to develop this program in order to be most effective.
In the case of Busan, the Immigrant Investor program is expected to be applied mostly to large projects — for example, East Busan Tourism Complex and LCT, which require a 5- to 10-year development period. This could be an issue to foreign investor because this period would exceed the time granted on their visas. Extended stays on the F-2 visa, for example, should be enabled to better fit these development periods.
Moreover the sooner the government decides to do so, the earlier we can see more benefits in Busan. It might also be good to give the local Busan government more flexibility in governing to find ways to adapt the Investor Immigrant Program and see the results rather than pursuing uniformity for all the cities through one strict policy.
Busan Metropolitan City and its citizens also need to show their approval of this program. They all have to recognize that they would share Busan with foreigners and also need to understand their cultural differences. Long-term success of the program cannot come without the acceptance of these facts.
With all of these efforts, it is expected that Busan will become one of the world’s globally renowned cities.