The 'Foreign Land Transaction Permit System,' implemented to curb speculative housing purchases by foreigners, is set to end in a week. Since its introduction, foreign housing transactions in Seoul have dropped by more than half, prompting interest in whether the system will be extended.
According to the Ministry of Land, Infrastructure and Transport, the permit designation period for areas including all of Seoul, 23 cities and counties in Gyeonggi Province, and seven districts in Incheon will expire on the 25th. The ministry plans to make a final decision on the extension after a review by the Central Urban Planning Committee. When the system was introduced last year, it was set for a one-year period, with a promise to consider an extension based on the real estate market situation.
The foreign-only permit system was established amid concerns that foreign investors using overseas funds, which are not subject to domestic financial regulations, would increase speculative housing purchases following the loan regulations implemented on June 27 last year. The designated areas include all of Seoul, as well as cities in Gyeonggi Province such as Suwon, Seongnam, Goyang, Yongin, Ansan, Bucheon, Gwacheon, Hanam, and Namyangju, along with districts in Incheon including Jung, Michuhol, Yeonsu, Namdong, Bupyeong, Gyeyang, and Seo.
Foreigners wishing to purchase single-family homes, multi-family homes, apartments, or townhouses in these areas must obtain permission from local governments. They are required to move in within four months of acquiring the property and must reside there for two years, effectively limiting investment purchases by foreigners who do not reside in South Korea.
Comparing the period from September to December last year, after the permit system was designated, with the same period in 2024, foreign housing transactions in the metropolitan area decreased from 2,279 to 1,481, a drop of 35%.
Seoul saw the largest decline, with foreign housing transactions falling from 496 to 243, a 51% decrease. Gyeonggi and Incheon also experienced declines of 30% and 33%, respectively, with the reductions concentrated in high-priced homes. Transactions for homes priced below 1.2 billion won decreased from 2,073 to 1,385, a 33% drop, while transactions for homes priced above 1.2 billion won fell from 206 to 96, a 53% decrease. By nationality, transactions by Chinese buyers decreased from 1,554 to 1,053, a 32% drop, while transactions by American buyers fell from 377 to 208, a 45% decrease.
Kim I-tak, the first vice minister of the Ministry of Land, Infrastructure and Transport, interpreted the decline in foreign housing transactions as a sign that demand, which had been fueling market overheating, is decreasing.
However, it is difficult to attribute the decline in transactions solely to the foreign-only permit system. In October of last year, the government designated all of Seoul and parts of Gyeonggi Province as regulated areas, which also restricted apartments in Seoul under the general permit system. Therefore, even if the foreign-only permit system ends on the 25th, it does not mean that the permit system for apartments in Seoul will disappear simultaneously.
Moreover, the scope of the foreign-only permit system is broader. While the general permit system primarily targets apartments throughout Seoul, the foreign-only permit system encompasses all types of housing, including single-family homes, multi-family homes, townhouses, and multi-unit dwellings. Thus, if the foreign-only designation ends, the separate permit and residency requirements imposed on foreigners may be lifted in areas and housing types not covered by other permit zones.
Park Won-gap, a senior real estate expert at KB Kookmin Bank, stated, “While foreigners are not purchasing homes in large numbers, it is unlikely to have a significant impact on the overall market trend. However, in areas like Ansan and Pyeongtaek, where foreign transactions are high, demand may decrease somewhat.”
* This article has been translated by AI.
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