By Yoon Ja-young
Foreigners, led by the Chinese, have steadily invested in properties on Jeju Island and now own 0.9 percent of Korea’s largest resort island.
But analysts and residents are concerned that unrestricted foreign investment could trigger developments that damage the environment and cause steep rises in property prices.
The Ministry of Land, Infrastructure and Transport said Thursday that foreigners owned 234.7 million square meters of land in Korea as of 2014, which is a 3.9 percent increase on the previous year. The total value of the land is 33.6 trillion won.
More than half the investors were ethnic Koreans with foreign nationalities, while corporations took more than 40 percent.
By nationality, 52.8 percent of investors were from the U.S., 10.9 percent from the EU, 7.3 percent from Japan and 5.6 percent from China.
Most notable was the Chinese investment in Jeju Island, which boosted the foreign purchase of land there by 51.6 percent, with 0.9 percent now belonging to foreigners.
Jeju has been encouraging foreign real estate investment. For instance, foreigners investing more than 500 million won in condominiums on Jeju get permanent residency after five years.
Since 2010, when the measure was introduced, more than 1,000 foreigners have received residency, most of whom are Chinese.
Ko Jong-wan, president of the Korea Asset Management Institute, said the residency policy had drawn investment from China, and the Chinese government had encouraged investment overseas.
“Due to the real estate bubble, the Chinese government encouraged people to seek investment overseas,” he said. “Now they are turning their eyes to not only Jeju Island but also properties near Hongdae in Seoul, where they can get rent.”
He said Chinese investment had helped sustain Korea’s real estate market, which had been sluggish in the past few years. But there were side effects, he said.
“Due to massive investment by the Chinese, Jeju has seen the steepest increase in land prices in the country during the past few years,” he said. “There is concern that there could be a bubble.”
He also said Chinese investment was focused on leisure facilities and casinos. “This may lead to reckless development and have a negative impact on Jeju’s people,” he said.
Ko said it was better to draw investors from other countries instead of just relying on China.
“Korea already has a huge economic dependence on China,” he said. “The government should take measures against possible side effects.”
A real estate agent working for foreign investors, who asked to remain anonymous, said the huge Chinese investment had had some negative effects.
“Because land prices have risen steeply in Jeju, some Korean companies that moved to Jeju are considering moving back to Seoul,” he said. “Other companies that had plans to move to Jeju have given up the plans.”
He said soaring apartment prices were also a burden on Jeju residents.
He also said that some Chinese investors were buying real estate on Jeju to send their children to international schools there.
“Their next step is to send their children to colleges in the United States,” he said. “I don’t think that’s what the Korean government intended when it started encouraging foreign investment in Jeju.”