While the South Korean Government tightens its mortgage rules to mitigate its growing household debt, a 33-year-old Chinese national purchased a luxury penthouse apartment worth 8.9 billion won ($7.51 million) in Seoul’s upscale district with 100 percent of the purchase price coming through a bank loan, drawing widespread concern.
South Korea’s household debts have continued to rise due to the prolonged CCP virus pandemic. To prevent excessive loans from causing an economic crisis, the South Korean government has implemented restrictive measures on loans, making it extremely difficult to obtain mortgage loans for both citizens and foreigners. Since 2019, it has been impossible to acquire mortgage loans from South Korean banks when purchasing real estate of more than 1.5 billion won ($1.25 million) in high speculation areas designated by the government, such as Gangnam District. Foreign banks operating in South Korea must also comply with the rules.
According to the office of Rep. So Byeong-hoon of the Democratic Party of Korea on Oct. 1, a 33-year-old Chinese man, Mr. A (real name undisclosed), bought a 4,391 square foot penthouse apartment in the Samsung Tower Palace in Dogok-dong, Gangnam-gu, Seoul.
The Samsung Tower Palace consists of seven towers, lettered A–G, built in the early 2000s. They range from 42–72 floors and are all used as luxury residential complexes. They are known as commercial and residential apartments for wealthy buyers. Mr. A purchased a duplex apartment with a lower floor of 2,616 square feet and an upper floor of 1,774 square feet. It is one of the few penthouses.
The incident caused widespread concern among South Koreans because the financing plan submitted by Mr. A to the Gangnam District government stated that the purchase price was entirely made up of bank loans, and no cash was involved.
However, supposing foreigners receive loans from an overseas bank, they would not be supervised under the South Korean financial authorities and domestic laws when acquiring Korean real estate. Therefore, many South Korean media speculated that Mr. A may have received a bank loan from overseas.
The growing controversy is that the South Korean financial authorities have no way to regulate foreign banks’ loans when they do not operate in South Korea. Loans obtained by foreigners from their foreign banks are usually processed in accordance with the laws of the other country.
Large Quantities of South Korean Real Estate Acquired by Foreigners, Mainly Chinese
In addition, on Sept. 29, Kim Ju-young, a Democratic Party member and a member of the South Korean National Assembly’s Strategy and Finance Committee, released data obtained from its National Tax Service. The data showed that from 2017 to May of 2021, Chinese nationals purchased 13,573 properties in South Korea, totaling over 3.16 trillion won ($2.64 billion).
Foreigners’ purchase of South Korean real estate is increasing every year. According to Assemblyman Hong Kee-won’s office, foreigners’ domestic housing purchases rose from 5,713 in 2016 to 8,756 in 2020. As of August this year, 1,961 foreigners owned two or more properties in South Korea, of which 26 foreigners owned ten or more properties. Among foreigners who have bought property in South Korea over the past five years, Chinese buyers accounted for the largest number with 67.1 percent, followed by Americans with 17 percent.
Hong emphasized that it is very abnormal for foreigners to own more than ten properties in South Korea when it is difficult for South Koreans to purchase a home due to restrictions on loans. “For the situation where foreigners own multiple houses, the Ministry of Land, Infrastructure, Transport (MOLIT) needs to establish a detection and data collection system for issues such as high-priced acquisitions that cause price speculation chaos in the real estate market,” Hong added.