“Scrutinizing Even Funding Sources”: Government Tightens Rules on Foreign Real-Estate Deals, Aiming to Erase Bias Against Locals

Real-Estate Transaction Reporting Act Enforcement Decree Promulgated
Additional Reporting Requirements for Residency Status and Address
Hopes Raise for Fair Taxation, Speculation Deterrence

The government is significantly strengthening reporting regulations for foreigners’ real-estate transactions. From next February, foreigners acquiring housing within areas designated as land-transaction permit zones (“land-permit zones”) will be required to submit a funding plan and supporting documentation, and must disclose residency status and whether they have lived in Korea for at least 183 days at the time of transaction reporting. The measure comes after repeated criticism that foreigners, unbound by domestic restrictions, have been buying real estate with funds of unclear origin — fueling speculative purchases and driving up housing prices.

Expanded Reporting Requirements: Foreign Buyers Must Report Residency Permits, Address, and 183-day Residence Compliance

On the 9th, the Ministry of Land, Infrastructure and Transport announced the promulgation of an amendment to the Enforcement Decree of the Real Estate Transaction Reporting Act, which will take effect on February 10 next year. The amendment seeks to strengthen transaction scrutiny and funding-source verification to curb speculative home purchases by foreigners and ensure fair tax collection. Under the change, when the buyer is a foreign national, the report must include “residency status” as well as “address and whether the buyer has resided in Korea for at least 183 days.” The ministry expects this to enable more precise preemptive enforcement against illegal real-estate activities such as unqualified rentals or tax evasion, while also enabling more thorough checks of appointed asset managers.

Foreigners purchasing housing within land-permit zones must also submit a funding plan and supporting documentation. The document must detail sources of overseas capital—including loan or deposit amounts and the names of foreign financial institutions—as well as domestic funding such as business-purpose loans and any assumption of lease deposits. The ministry anticipates that more granular verification of funding sources will accelerate investigations of market-distorting behavior and strengthen the basis for fair taxation.

This amendment follows the August designation of land-permit zones for foreign buyers. At that time, most of the Seoul metropolitan area—including all of Seoul—was designated. In Gyeonggi Province, 23 cities and counties were covered, excluding a limited number of areas such as Yangju, Icheon, and Gapyeong. In Incheon, seven districts were included. Since August 26, foreigners purchasing residential property, including apartments, in these zones have been required to reside in the property for two years.

Foreigners’ ‘Real Estate Shopping’ in Gangnam: Problems Multiply

The tightening aims to filter out cases in which foreign buyers’ funding sources are opaque or where the purchase is not intended for actual residence. According to the real-estate industry, more foreigners have been buying high-priced housing using overseas funds while bypassing domestic lending restrictions, raising concerns about market distortion. Limited access to foreigners’ personal information and property-holding records has also allowed many to avoid acquisition-tax obligations and multi-homeowner regulations.

In one case in March, a Chinese national born in 1988 purchased a penthouse in Tower Palace in Dogok-dong, Gangnam, for approximately USD 6.05 million, stating in the funding plan that the entire amount was financed through a foreign bank loan. The number of Chinese buyers acquiring long-term redevelopment holdings in affluent districts such as Apgujeong and Jamsil has also been rising. “Foreign buyers often rely on their home-country banks or parental assistance, and the source of funds is frequently unclear, making real-estate purchases far easier than for Korean citizens,” said a broker specializing in foreign clients.

Gangnam’s apartment market has long had Chinese buyers as a major customer base. According to registry data on foreign ownership transfers, the number of Chinese nationals owning Korean real estate—including apartments, villas, commercial buildings, and land—rose from 54,320 in 2020 to 96,955 as of last April, an increase of 78.5% in five years. Their share among all foreign owners climbed from 35.5% to 41.6%. Seven in ten Chinese owners hold property in the Seoul–Gyeonggi–Incheon metropolitan area; their metropolitan holdings rose from 38,419 in 2020 to 68,819 this year, up 79.1%. Purchases are increasingly spreading beyond traditional China-town districts such as Geumcheon or Yeongdeungpo to higher-priced areas in Gangnam.

Industry sources also report rumors that Chinese investors are pooling cash to buy apartments outright. In one widely cited example, 20 Chinese individuals each contribute USD 68,000, pooling funds so that one person can purchase a USD 1.36 million apartment, rent it out, and later distribute the sale profit among the group. Purchases of redevelopment and reconstruction-designated sites by Chinese nationals have also increased. These dynamics have contributed to overheating in Korea’s property market, yet there has been virtually no regulation until now.

Controversy Over Chinese Landlord Who Defaulted on USD 5.75 Million

These developments have fueled public anger. Korean buyers must comply with complex procedures and heavy regulations, while foreign buyers face far fewer restrictions—creating what many view as reverse discrimination. Calls have intensified for applying “reciprocity” in land transactions between Korea and China, as foreigners cannot buy land in China and must meet stringent conditions even to buy housing, such as residing in the country for more than a year.

In practice, when foreigners borrow money from overseas acquaintances or entities and purchase Korean property with minimal equity, regulators often cannot track funding sources, making it difficult to apply multi-homeowner rules or levy taxes. Some foreign multi-homeowners have operated rental businesses without reporting rental income, raising concerns about tax evasion. In one case, a Chinese national on a student visa was found to own eight apartments and collect rental income without declaring it. While Korean multi-homeowners face heavy capital-gains surcharges and other taxes, foreigners have existed in a regulatory blind spot.

Cases of foreign landlords failing to return lease deposits have also grown. Between 2022 and September this year, there were 103 guarantee-claim incidents involving foreign landlords, totaling approximately USD 16.5 million in damages. The housing-guarantee corporation paid out about USD 10.9 million in 67 cases but recovered only about USD 2,240, roughly 2% of claims. Unrecovered claims owed by foreign landlords total around USD 5.75 million, with Chinese landlords accounting for the largest share.