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.
Foreigners without local income likely to face mortgage ban
An aerial view of apartment complexes is seen in Seoul, Sunday. Yonhap
By Park Jae-hyuk
By Park Jae-hyuk
Foreigners hoping to purchase high-priced property here without locally earned income are facing a high probability of a ban on taking out mortgages from domestic banks.
Rep. So Byung-hoon of the ruling Democratic Party of Korea and 10 other lawmakers proposed a revision of the Banking Act, Tuesday, to prohibit local lenders from offering mortgages to foreigners without locally earned income here from the past two years.
The revision bill will also make commercial properties subject to the same loan-to-value (LTV) and debt-to-income (DTI) ratios applied to housing loans.
The current law does not allow lenders to offer mortgages to buyers of Seoul apartments costing over 1.5 billion won ($1.3 million) because the entire city is designated as a “speculative or overheated speculative area.”
However, the LTV ratios applied to commercial properties in the city have stood at up to 80 percent, so non-Korea property owners ― the majority of whom are Chinese ― have been able to collect commercial buildings with residential spaces after borrowing large amounts of money from Korean banks.
“A Chinese national bought a commercial building with residential spaces in Mapo-gu for 1.6 billion won last October, after borrowing 1.2 billion won from a domestic bank,” Rep. So said, adding the purchase seemed to be intended for rental income, given the buyer already owned another home in Korea.
The lawmaker has continued to criticize Chinese landlords, alleging they have capitalized on regulatory loopholes and caused the rapid housing price hike in Korea.
In January, he disclosed the case of another Chinese national, who bought a commercial building with residential spaces in Itaewon for 7.8 billion won last year with the intention to rent it out, after borrowing 5.9 billion won from a Korean bank.
“If the Banking Act is revised, it will be virtually impossible to buy Korean properties by borrowing billions of won from domestic banks, as the two Chinese nationals did,” he said. “Because the purchase of Korean real estate by foreigners is increasing, the government needs to impose appropriate regulations.”
Data from the Ministry of Land, Infrastructure and Transport showed the number of real estate purchases by foreigners rose to 21,048 last year from 17,763 in 2019, 19,948 in 2018 and 18,497 in 2017.
Purchases of housing by non-Koreans, who covered more than 60 percent of their costs with mortgages, jumped to 187 last year from one in 2019 and zero in 2018.