More foreigners own homes in Seoul as Koreans face tightened lending rules

Apartments and other forms of housing are seen from an observation deck at the top of Mount Nam in Seoul, Sunday. Yonhap

More foreigners are buying homes in Seoul in the wake of the government’s latest lending rule that only makes it tougher for Koreans to own a house, government data showed Wednesday.

Compiled by the Supreme Court, the data deals with registered transactions, legal ownership rights and other information concerning real estate nationwide.

It reported a total of 120 cases of foreigners purchasing homes in the capital city from July 1 to 18, up 14.3 percent from a month earlier. By nationality, the buyers included 57 Chinese, 35 Americans and eight Canadians.

In contrast, the number of home purchases by Koreans dropped 27.2 percent to 7,632 over the same time period. The drop came after government measures to limit the cap on mortgage loans up to 600 million won ($435,500) came into effect on June 27.

It was intended to curb rising home prices in Seoul, which soared as part of a “honeymoon effect” after President Lee Jae Myung took office on June 4.

The measure was unusually aggressive, because, unlike previous lending rules, it restricted the maximum loan amount regardless of buyers’ income or the value of the home.

Whether it is fairly applied to all nationalities has been disputed because only Korean citizens were not permitted to exceed 600 million won in taking out mortgage loans, while foreigners were not subject to such restriction.

“The June 27 policy is heightening concerns over reverse discrimination against Korean borrowers,” Kwon Dae-jung, a real estate professor at Sogang University, said.

He noted that foreigners were excluded from loan-to-value (LTV) ratio, debt service ratio (DSR) and other regulatory tools concerning housing loans.

Some buyers from abroad reportedly exploited regulatory loopholes for speculative transactions.

“The latest measure is harsher than previous rules toward domestic home buyers, and therefore is more serious in its nature,” the professor said.

He warned about foreigners engaging in real estate speculation, pointing out many of the aforementioned 120 cases involved apartments and officetels.

Apartments are the most popular form of housing in Korea. Officetels are studio flats in multipurpose buildings and in high demand from single-person households.

Asking not to be named, a real estate agent from Global Real Estate Association of Seoul said he heard about “foreign clients putting up apartments and offictels they own in Seoul for sale in their respective countries.”

“It means these corresponding homes will be owned by foreigners time after time, with less chance for Koreans to have a home,” he said.