Foreign property buying is on the rise — along with red flags

The number of foreign real estate transactions reported to authorities for suspected legal violations more than doubled in a year, with the increase concentrated in the Seoul metropolitan area and high-value properties.

One such case involved a foreign national who purchased three plots of land in Seoul, Gyeonggi and Incheon but failed to disclose how the purchases were financed. The land purchase agreements also contained discrepancies, as the dates listed in the contracts differed from the actual transaction dates.

The irregularities came to light during an investigation by the Ministry of Land, Infrastructure and Transport last year, and the transactions were subsequently referred to the relevant regional governments for suspected violations.

Reported cases have risen sharply in Seoul and among high-value properties amid nearly 20 percent growth in foreign-owned land parcels over the past four years, with transactions that evade legal oversight altogether becoming more common. This has also raised concerns over fairness for Korean nationals, who face tighter regulations on real estate purchases and financing.

The number of suspicious foreign real estate transactions reported to authorities in Seoul rose from 64 in 2024 to 135 last year, according to Land Ministry data submitted to People Power Party Rep. Kim Jong-yang, a member of the National Assembly’s Land, Infrastructure and Transport Committee, on Monday.

The increase was also pronounced among high-value transactions. The number of reported transactions worth at least 3 billion won ($2.21 million) more than doubled from 29 to 62 over the same period. Those worth between 1 billion won and 3 billion won rose from 18 to 28.

Suspicious transactions refer to those selected for investigation because of irregularities involving factors such as the transaction price or source of funds. If an investigation uncovers suspected violations such as the illegal transfer of funds from overseas, improper gifting or false reporting, the case is referred to the relevant authorities.

While referrals involving foreign transactions in Seoul and high-value properties increased, the overall number of transactions investigated declined from previous years. The number of suspicious foreign real estate transactions investigated plunged from 1,392 in 2023 to 557 in 2024 and stood at just 605 last year.

“The number of investigations into suspicious transactions by foreigners has remained flat, while suspected violations have rapidly become concentrated in Seoul and ultra-high-value transactions,” Rep. Kim said. “While the government imposes tighter loan and tax restrictions on Korean nationals, high-value purchases by foreigners have effectively gone unchecked.”

Among nationals, Chinese accounted for the largest share of foreign transactions reported for suspected violations. Of the 383 referrals categorized by nationality last year, Chinese nationals accounted for 184, or 48 percent, followed by U.S. nationals with 107.

Foreign ownership of land in Korea has also steadily expanded. The number of plots owned by foreigners rose 18.6 percent from 167,725 at the end of 2021 to 199,003 at the end of last year. Their total officially assessed value increased 6.5 percent over the same period, from 32.06 trillion won to 34.14 trillion won.

Land owned by Chinese nationals increased 32.8 percent from 64,171 plots to 85,237 over the same period, while its officially assessed value rose about 31 percent from 3.3 trillion won to 4.3 trillion won.

“There needs to be tighter oversight of transactions in which foreigners purchase homes for investment purposes without actually residing in them, as well as transactions suspected of involving improper gifting or the use of borrowed names,” said Kim Hyo-sun, a senior real estate specialist at KB Kookmin Bank. 

The government designated major parts of the Seoul metropolitan area as land transaction permit zones for foreign buyers in August last year in response to the increase in foreign real estate transactions. Housing transactions by foreigners in the Seoul metropolitan area subsequently fell 27 percent, the government said.

Concerns have persisted, however, over whether foreign and Korean buyers face an uneven playing field in financing, particularly after Korea significantly tightened domestic lending restrictions.

Foreign buyers were more likely than Korean buyers not to list a loan amount from financial institutions in their home financing plans. Among those who filed for purchases in Seoul from February through April this year, 52.2 percent of foreign buyers listed no loan amount from financial institutions, compared to 38.4 percent of Korean buyers.

Foreign buyers can also obtain financing overseas, which makes them relatively less affected by domestic lending restrictions. 

“If normal housing demand among Korean nationals is constrained by lending restrictions, it could create a reverse-discrimination problem in which foreigners have a relative advantage when purchasing homes,” said Kim Je-kyung, director of Tumi Real Estate Consulting.

BY PARK HYUN-JU [[email protected]]