Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Expats rake in luxury houses in Seoul
A bird's-eye view of residential area in Seoul / Korea Times file
By Park Jae-hyuk
By Park Jae-hyuk
The purchase of expensive real estate by foreigners has been brisk in Seoul's Mapo-gu, Yongsan-gu, Seongdong-gu and southeastern districts over the past five years, showing a series of government measures to curb housing prices have made practically no difference to them, a lawmaker said Friday.
According to the Korea Appraisal Board's (KAB) data given to Rep. Hong Chul-ho of the main opposition Liberty Korea Party, the number of Seoul apartment units and houses purchased by foreigners was 10,479 between January 2015 and September 2019, accounting for 1.11 percent of the total number of housing purchases in Seoul.
The same data showed they collectively spent 6.36 trillion won ($5.45 billion) on their purchases. Given that the amount accounted for 1.26 percent of the total amount spent for buying Seoul houses, the data indicates foreigners have tended to buy luxury housing more than Koreans.
During the period, the proportions of houses purchased by foreigners were 1.62 percent in Gangnam-gu and 1.53 percent in Seocho-gu – higher than the average proportion of 1.11 percent. The two neighboring southern districts are the country’s most expensive residential areas.
The figures were 1.55 percent in Mapo-gu, 2.41 percent in Yongsan-gu and 1.24 percent in Seongdong-gu. The three districts have been referred to as “Mayongseong” recently, as they have led the latest upward trend in the capital area’s housing prices.
The districts popular with foreigners have shown higher growth rates in housing prices than others.
Other KAB data showed most of the foreign buyers were Chinese.
Their purchases accounted for 46.2 percent of Seoul housing bought by foreigners during the period, while American purchases accounted for 25.9 percent and 1.8 percent went to Japanese buyers.
The buying spree has been attributed to foreigners being able to avoid the government regulations aiming to control the borrowing of money for the purchase of real estate.
According to the current law, foreigners are not subject to regulations on the loan-to-value (LTV) ratio, debt-to-income (DTI) ratio or debt-service ratio (DSR), if they raise capital from global banks or lenders of their own countries.
“The government has imposed excessive regulations on Korean buyers, while allowing foreigners to avoid regulations. This caused an unlevel playing field in the market,” Rep. Hong said. “Considering the high proportion of purchases by foreigners in areas showing soaring housing prices, it is feared that an outflow of national wealth may occur.”
Experts said foreigners can also benefit from the nation's lax transfer income tax regulations.
If foreigners cite moving to another country as a reason for selling their homes here or claim they do not own homes in their home countries, the government can hardly verify their authenticity, so they can avoid heavy transfer income taxes unlike Koreans.
“Even if foreigners make short-term profits by reselling Gangnam apartments, the current law allows them to avoid heavy transfer income taxes,” said Kim Won-joong, an adjunct professor at Konkuk University.