National Assembly pushes bills to restrict foreign property purchasers

Tourists take photos atop Mount Nam in Seoul, Tuesday. Yonhap

The National Assembly is pushing legislation to further restrict property purchases by foreign nationals by making permanent a policy requiring government approval before buying real estate in the greater Seoul area, industry officials said Wednesday.

The legislation aims to codify the government policy that took effect on Tuesday. Although the measure is currently slated to remain in place for one year with the option of an extension, enshrining it in law would make it permanent.

There appears to be little disagreement between the ruling and opposition parties over the move to tighten regulations on foreign real estate acquisitions, raising expectations that the legislation will advance quickly.

As of Wednesday, a total of 12 proposed bills focus on establishing requirements for prior government approval, verified residence and full transparency in funding sources.

On Monday, Rep. Yoon Joon-byeong of the ruling Democratic Party of Korea and nine other lawmakers introduced a bill requiring foreign nationals to live in the purchased property for three years. The bill includes penalty provisions of up to two years in prison or fines of 20 million won ($14,322).

Yoon said the current system "leads to reverse discrimination against Korean citizens and enables the unchecked inflow of speculative foreign capital."

Members of the main opposition People Power Party (PPP) have also proposed similar bills.

Rep. Kang Min-kuk and nine other PPP lawmakers introduced a bill, Friday, that goes further by requiring foreign buyers to use a certain percentage of their own capital when purchasing property in Korea. The measure aims to block speculative foreign capital from entering the domestic real estate market.

"The aim is to help establish a real estate transaction order centered on genuine demand from domestic residents," Kang said.

The recent rules follow a public backlash against real estate regulations announced on June 27. As those rules tightened lending for Korean nationals to address soaring property prices and household debt, criticism mounted that foreign nationals faced fewer restrictions and could buy homes more freely, possibly for speculative purposes.

"Korean nationals face strict mortgage regulations from domestic lenders, but foreign nationals can avoid these rules by borrowing from financial institutions in their home countries," the Yeouido Institute, a think tank affiliated with the PPP, wrote in a recent report.

"As a result, the impact of Korean lending regulations on foreign nationals’ home purchases remains limited."

Against this backdrop, starting Tuesday, the Ministry of Land, Infrastructure and Transport mandated that all foreign individuals, corporations and government entities must obtain approval from local authorities before acquiring real estate in Seoul, seven districts in Incheon and 23 cities and counties in Gyeonggi Province.

Approved buyers are required to move into the property within four months and reside there for at least two years. In some designated areas, foreign buyers must also submit financing plans, disclose the source of their funds and state their visa type.