From now on, when foreign investors conduct transactions of dwellings, the items required in transaction reports will be expanded to include residency status, and when trading dwellings within land transaction permit zones, submitting a financing plan and supporting documents will be mandatory.
The Ministry of Land, Infrastructure and Transport said the Enforcement Decree of the Act on Report on Real Estate Transactions, which contains these measures, was promulgated on Dec. 9 and will take effect on Feb. 10 next year.
Earlier, on Aug. 21, the Ministry of Land, Infrastructure and Transport designated land transaction permit zones in key parts of the greater Seoul area for transactions of dwellings by foreigners to curb speculation. Accordingly, starting on Aug. 26, foreigners and others seeking to transact dwellings within land transaction permit zones may do so only if they can actually reside there for two years after acquisition.
The Ministry of Land, Infrastructure and Transport said that after closely reviewing the trend of foreign transactions of dwellings following the designation of land transaction permit zones, the number of foreign transactions of dwellings in the greater Seoul area fell 40% year over year in the last three months (September to November), from 1,793 to 1,080.
By region, the transaction shares were 16.6% in Seoul, 66.1% in Gyeonggi, and 17.3% in Incheon. The year-over-year decline was largest in Seoul, at 49% (353 cases to 179). A check of the three Gangnam districts and Yongsan District showed a 48% year-over-year drop, and among them, Seocho District recorded 75% (20 cases to 5), the steepest decline.
By nationality, China accounted for 72% (778 cases), down 39% from a year earlier. Next was the United States at 14% (152 cases), down 41%, followed by Canada at 3% (36 cases).
In addition, transactions with designated trustees—which can be seen as transactions of dwellings by nonresident foreigners—fell 98% year over year in the past three months (56 cases to 1 case). That one case was a transaction in Gyeonggi outside the foreign land transaction permit zones in the greater Seoul area. When nonresident foreigners purchase dwellings in Korea, they must report a designated trustee as a manager to respond to requests for materials from actual transaction inspections after acquisition.
The Ministry of Land, Infrastructure and Transport plans to continue monitoring trends in foreign transactions of dwellings. It also plans to keep refining the system to establish a market order centered on end users.
The Ministry of Land, Infrastructure and Transport also, as released on Aug. 21, required that when the buyer is a foreigner, residency status, address, and whether the person has resided in Korea for 183 days or more be included in the transaction report. The ministry expects this to proactively prevent illegal real estate activities such as unqualified leasing businesses and tax evasion, and to allow timely review of the adequacy of trustee filings.
Going forward, if a permit is obtained to acquire dwellings within a land transaction permit zone, a financing plan and supporting documents must be submitted when filing the transaction report. The contents of the financing plan will also be expanded. It will require detailed entries on overseas funding, such as overseas borrowing fund or deposits funding amounts and the names of overseas financial institutions, as well as domestic funding, such as whether deposits are assumed and business-purpose loans, and authorities will scrutinize them more closely.
Meanwhile, with this amendment to the Enforcement Decree of the Act on Report on Real Estate Transactions expanding reporting obligations, the Ministry of Land, Infrastructure and Transport is improving the current Real Estate Transaction Management System (RTMS) and the electronic contract system for the convenience of parties to transactions and licensed agents. The ministry plans to complete the system build as quickly as possible so reports can be filed online simultaneously with the amended decree taking effect.
Park Jun-hyeong, land policy director at the Ministry of Land, Infrastructure and Transport, said, "With this decree revision, an institutional foundation has been laid to prevent real estate speculation by foreigners," and added, "Based on this, we will proactively prevent speculative acts by foreigners and establish a market order centered on end users to help stabilize home prices."