In the real estate market, there was a reaction that the government's designation of foreign land transaction permission zones will serve as a trigger to reduce speculative demand influx. However, there are forecasts that limiting foreign purchases of dwellings will be difficult to lead to stabilization in the real estate market.
On the 21st, the Ministry of Land, Infrastructure and Transport designated all areas of Seoul, seven districts in Incheon, and 23 cities and counties in Gyeonggi Province as foreign land transaction permission zones after deliberation by the Central Urban Planning Committee. Foreigners purchasing dwellings in these areas must receive permission from the city, county, or district office in advance. A two-year residency obligation is also imposed. The effectiveness of the permission zones is from the 26th of this month until August 25th of next year for one year.
Experts have forecast that the implementation of the foreign land transaction permission system could prevent the influx of foreign speculative demand and disrupt the market.
Ham Young-jin, head of the real estate research lab at Woori Bank, said, "Considering that foreigners' purchases of apartments have been increasing, mainly in the metropolitan area, and that there have been many cases of non-residency, this measure can be an opportunity to reduce the influx of speculative demand relying on profits by closely examining issues related to actual residency and financing."
Kim Hyo-seon, a real estate expert at NH Nonghyup Bank, noted, "Although the proportion of foreign dwelling transactions is small, a single speculative transaction by non-residents can have a very large impact, so it is necessary to block such cases in advance." He added, "Especially in Gangnam, even if the number of transactions is low, a single transaction can greatly affect the overall market, and since the metropolitan area has a direction to suppress domestic speculative transactions, the same rules should apply to foreigners."
There are positive opinions regarding regulatory fairness between locals and foreigners. Lee Eun-hyung, a research fellow at the Construction Policy Institute, said, "This foreign land transaction permission system focuses on 'verifying actual residency demand' and 'excluding speculative demand' and that the recent measures are positive considering the real estate regulations that applied to locals, including residency obligations, loan regulations, and source of funds investigations."
However, there are forecasts that simply curbing foreign speculation won't lead to an overall reversal in the dwelling market atmosphere. The expert, Kim, stated, "The absolute volume of transactions by foreigners is not high, and since the majority are for the residential purposes of Korea residents, the tangible effect may not be significant."
This research fellow also stated, "It is hard to say that the proportion of real estate (dwellings) owned by foreigners is large at this point, and discussing whether this measure will stabilize the domestic real estate market holds little significance." He emphasized, "A key issue when discussing reciprocity between countries has been 'perpetual acquisition of real estate ownership' and this aspect should also be discussed in the future."