Korea's lending clampdown leaves door wide open for foreign buyers

A view of Seoul from the N Seoul Tower Observatory in Namsan Yonhap — A view of Seoul from the N Seoul Tower Observatory in Namsan/ Yonhap

SEOUL, July 23 (AJP) - Foreign property acquisitions in Seoul have surged in the wake of South Korea’s tightened mortgage lending rules for domestic buyers, according to newly released court registry data.

The new regulations, which took effect on June 27, cap mortgage loans at 600 million won (about $435,000) for most buyers.

In the weeks that followed, domestic transactions plummeted. Between July 1 and July 18, purchases of apartments and officetels — mixed-use buildings that serve both residential and commercial purposes — fell by 27.2 percent compared to the same period in June.

In contrast, foreign acquisitions rose 14.3 percent over the same span, totaling 120 transactions. Chinese nationals accounted for nearly half, with 57 purchases, followed by Americans with 35 and Canadians with eight.

The increase highlights a regulatory gap that exempts overseas buyers using foreign financing from the lending restrictions imposed on domestic borrowers. While South Korean residents are subject to strict lending requirements, foreigners using external capital sources face few such constraints.

The disparity has prompted a wave of high-end listings targeting Chinese investors. On Juwai.com, China’s largest international property platform, dozens of Seoul luxury apartments are featured, with some priced as high as 25.8 billion won (approximately $18.7 million).

Foreign ownership of South Korean residential properties exceeded 100,000 units for the first time last year, an increase of 9.6 percent from the year prior. Nearly three-quarters of those properties are located in the greater Seoul area, and more than 9,000 units are held through fractional ownership by multiple foreign buyers.

Critics have pointed to the uneven enforcement of lending rules.

Domestic buyers face immediate loan recalls and penalties for violations, while foreign buyers using offshore funding mechanisms are largely unaffected — exposing what lawmakers and housing advocates describe as a structural enforcement gap.

In response, lawmakers have proposed legislation to rein in foreign purchases. The measures include shifting from a notification-based system to a permit-based process and requiring a minimum three-year residency commitment for foreign buyers seeking to acquire residential property.

Kim Dong-young davekim0807@ajupress.com