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Korea becomes an increasingly popular among foreign property buyers.
It’s not strange, as it has one of the region’s strongest economies, is politically stable and expected to grow much in the coming decades.
In fact, Korea will even surpass Japan in terms of GDP per capita within the near future and continues to excel in a number of industries.
Yet before you buy property in Korea, it’s important that you know about foreign ownership regulations, property taxes, if you can get a visa or residency when buying property and more.
In this article you’ll learn the following:
- Can foreigners buy property in Korea?
- Can foreigners buy land in Korea?
- Can foreigners get mortgages in Korea?
- What taxes do I need to pay when buying property in Korea?
- Can I get a residence permit if I buy property in Korea?
- Can I rent out my property as a non-resident foreigner?
- Where should I buy property in Korea?
- Property prices in Korea
Can foreigners buy property in Korea?
Foreigners don’t have any issues to buy property in Korea in general.
But you need to do thorough research and follow some regulations related to foreign ownership, especially if you’re a non-resident. In such case, you need to comply with the following acts:
- The Foreigner’s Land Acquisition Act
- The Registration of Real Estate Act
- The Foreign Exchange Transactions Act
Let’s have a look at each Act to understand what this means practically.
The Foreigner’s Land Acquisition Act
The Foreigner’s Land Acquisition Act says that when you enter into a Sales contract with a seller, you need to inform this to the head of the government within 60 days, after the contract was made.
In addition, you should seek approval for the acquisition of land located in protected areas, where:
- The military operates
- There are cultural properties with heritage value
- Or where there’s a conservation area to protect nature and ecosystems
In case you don’t apply for a permit, if you’re obliged to do so, you will either be fined or face imprisonment.
The Registration of Real Estate Act
This act simply explains the correct procedure when registering a property. It applies to both Korean nationals, foreign residents and non-residents.
The act includes details regarding, for example:
- Ownership of property
- Your rights to rent out your property, and making a profit from it
- Easement (which is a word for a person that rents land from a landowner, during a limited time)
The Foreign Exchange Transactions Act
This act only applies to foreigners who are non-residents, and that buy property in Korea.
Simply put, it explains the guidelines and the importance of foreign transactions, such as keeping the Wong (official currency in Korea) and international payments on a “balanced” level.
It also refers to transactions made between Korea and other countries, which is required if you are a non-resident buyer.
For more information, I recommend that you visit the Korean Government’s website.
My recommendation is that you ask your Solicitor or Real estate agent, to confirm whether the property needs any special approvals, referring to above Acts.
Can foreigners buy land in Korea?
Yes, foreigners generally don’t have any issues to buy land. This is a great benefit and not always the case in developing countries like Thailand.
If you want to learn more about land ownership, I recommend you to read my separate guide that explains in which countries foreigners can buy land in Asia.
Can foreigners get mortgages in Korea?
The biggest banks like HSBC, Standard Chartered, Citibank, Agricultural Bank of China and China Construction Bank all have offices in Korea.
But, it’s difficult for non-residents to apply for local mortgages.
Like in Japan, you usually need to reside in Korea, and preferably be a permanent resident.
Standard Chartered Korea is one bank that offers mortgages to foreigners that reside in Korea and that I recommend you to contact.
So how does it work when applying for a mortgage?
If you’re a foreign resident, you first need to provide a ‘Certificate of Local Residency’ or a ‘Certificate of Foreign National Registration’, to prove your residency.
Other documents you need to provide are: ‘Certificate of Immigration’, ‘Certificate of Employment’, or a ‘Certificate of Business Registration’ (in case you own a business).
Due to rapidly increasing property prices over the last years, the Korean Government has made it even more difficult for investors to get mortgages.
Taxes have been raised as well, like the capital gains tax, in order to cool down the market.
Getting an overseas mortgage when buying property in Korea
The easier option is to apply for a mortgage in your home country, or by paying everything in cash.
This is quite common for investors from countries like China, that look for investment opportunities overseas due to inflated property prices back home.
Contact a few banks back home and see what options you have.
What taxes do I need to pay when buying property in Korea?
Let’s have a look at the taxes you need to pay when buying property in Korea.
The stamp duty ranges between KRW 50 – 350,000 (up to USD 320), depending on the value of the property.
The stamp duty is comparably low compared to other countries. In places like Hong Kong and Singapore, the rates are significantly higher.
But you also need to add an acquisition tax.
The acquisition tax is currently set to 2% and paid when you buy the property.
The annual property tax for villas is 4%.
For properties other than villas, the rate ranges between 0.15 – 0.50%, depending on the value of the property and its location.
Rental income tax (withholding tax)
The rental income tax is same for non-residents and residents. The tax rate ranged between 6 – 40%, depending on the total amount of your rental incomes.
From KRW 0 – 12,000,000 (around USD 0 – 10,000) the tax is 6%.
Capital gains tax
Same as with the rental income tax, the capital gains tax ranges between 6 – 40%, depending on the property value.
The background of this is that the rental income is seen as a capital gain made throughout the year.
Can I get a residence permit if I buy property in Korea?
You’ll not get residency automatically by simply buying property.
However, the same as it goes in Japan, you’re able to apply for a residence permit through a so called point system. And the grading is even similar to Japan’s.
Getting an F-2 visa
To apply to become a long term resident under the F-2 visa, you need to get at least 80 points in the point system.
So how does it work?
Here, they’ll mainly take your age, Korean language proficiency, income and professional experience into consideration.
Simply speaking, if you want to rank high in the F-2 point system, you should be 30-34 years old, have a PhD in engineering and fluent in Korean. If you have a good income and professional experience from Korea on top of that, you’re good to go.
You’ll also get extra points if you have paid taxes in Korea (the higher the better), studied in Korea, have professional experience from abroad or have done volunteer activities in Korea.
Can I rent out my property as a non-resident foreigner?
Yes, you can rent out your property as a foreigner.
Even if it’s common that Koreans don’t find their tenants via Real estate agents, I recommend you to do so.
As a foreigner, it’s often not easy to navigate and communicate in a foreign country, where language barriers can create issues and misunderstandings.
Also, if you need a Real estate agent that can communicate in Cantonese, Mandarin or Japanese, you’ll have no issues to find one in places like Seoul, Busan or Jeju Island.
How can I find a real estate agent?
There are a number of international real estate agents operating in Korea, ready to serve both locals and foreigners.
Some of the biggest and most popular are:
- CBRE Korea
- Knight Frank Korea
- Cushman & Wakefield Korea
- RE/MAX Korea
If you’re living in Mainland China, Hong Kong, Singapore or any nearby countries, you can also make a short trip to Korea to look around locally, at the same time as you enjoy everything it has to offer.
How much do I need to pay real estate agents in Korea?
If you use a Real estate agent when buying the property, you’ll usually pay a fee of 0.2 – 0.9%.
This is lower compared to many other countries and can reduce a lot of hurdles, compared to if you walk the road on your own.
Jeonse vs Wolse
In Korea, you usually rent a property via the Jeonse or the Wolse system.
The Jeonse system is typically not known in other countries and means that you submit, let’s say, a one year total of rent to the landlord.
Later, you receive the money back. This means that you can save a lot of money by avoiding to pay rent, but at the same time lose money, due to the time value of money.
For example, the landlord can use your money for other investments, such as stocks, and receive profits bigger than the rental incomes otherwise received.
The Wolse system is same as the common rental system we use in other countries. That means, you pay 1-3 months of rent in deposit, then you pay the rent on a monthly basis.
Where should I buy property in Korea?
Let’s have a look at the most interesting cities when buying property in Korea.
Prices have skyrocketed in Seoul the past years, for sure, but continue to be one of the most popular and interesting cities for property investment.
Seoul has everything to offer and you can be sure to find tenants who want to rent your property, with okay rental yields.
It’s also one of the best places to invest in Korea if you plan to send your children abroad for overseas studies.
As you probably know by this time, Seoul is the economic engine of Korea and roughly a third of the population lives here.
Busan is smaller than Seoul, but has seen a big influx of Japanese and Chinese investors in the past years.
Properties can be bought for a fraction compared to Seoul and places like Hong Kong, Singapore and Shanghai. At the same time, you can enjoy the great local culture and weather.
Busan is also a major city that hosts many good universities, if you plan to send your children abroad.
Asian investors, mainly from China, have poured into Jeju island the past years.a
The background is that foreign investors have been able to receive a resident permits, if they have come up with an investment bigger than KRW 500,000,000 (slightly less than USD 500,000).
Even if the Government has introduced restrictions due to the big influx of Chinese investors, they still pour money into this beautiful island with a hope to keep it as their future retreat.
Property prices in Korea
Property prices have increased significantly in the past years, a main reason is the influx of foreign investors.
In late 2018, the average house price in Seoul was more than 700 million Wong (USD 577,000). In areas like Gangnam, prices have reached well above USD 700,000 on average.
Naturally, this has left the government with no other choice than to increase taxes and introduce so called non-speculation zones.
If you look for cheaper property, you should definitely have a look at Busan where property doesn’t even cost half as much as in Seoul.
Foreigners generally don’t have any restrictions to buy property (including land) in Korea. But, be sure to confirm if you buy property in a protected or sensitive area, and submit the applications needed in that case.
You can also receive a residence permit if you manage to get enough points through Korea’s point system, which is similar to the point system in Japan.
Even if prices have increased greatly the past years, Asian investors still see Korea as a stable place to store their cash, over the long term.
In Seoul, prices have soured the past years, if you want to look for cheaper properties, you should have a look at Busan which offer properties at lower prices.