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Korea is undoubtedly one of the easiest countries to buy real estate in Asia and foreign investors have poured in during the past years.
This has left the country with uncontrolled price increases and locals are putting more pressure on the government to curb sales.
Despite its small size, Korea offers plenty of investment opportunities for land buyers. Jeju Island, Seoul, Busan, and Incheon are just examples of places that have become increasingly targeted by foreigners.
Even if it’s fairly easy and transparent to acquire land in Korea, you should understand what regulations that apply to foreigners and how you can find land for sale. Therefore, I decided to write this article.
Topics covered:
- Can foreigners buy land in Korea?
- Documents Needed When Buying Land
- Land Prices in Korea
- Taxes
- Finding Land for Sale in Korea
Can foreigners buy land in Korea?
Korea is one of a few Asian countries, along with Malaysia and Japan, that allows foreign ownership of land. Here, you have no issues to buy property on either a leasehold or freehold basis.
The buying process is comparatively straightforward and the risk of coming across dubious partners less common to countries like Cambodia, for example.
Besides, Korea has a developed and transparent title-system that makes ownership secure by comparison.
Yet, investing in land plots as a non-resident foreigner means that you’re subject to some additional regulations though. These regulations are:
- The Foreigner’s Land Acquisition Act
- The Registration of Real Estate Act
- The Foreign Exchange Transactions Act
Let’s review the acts in detail and what restrictions this put on you as a foreign investor.
1. The Foreigner’s Land Acquisition Act
As explained in my separate article about buying real estate in Korea, the Foreigner’s Land Acquisition Act informs that you have to inform the authorities about the purchase within 60 days.
The information should be shared after you signed the Sales & Purchasing Contract (SPA).
The act also stipulates that you have to obtain approval if you intend to buy land in sensitive and protected areas, including:
- Military areas
- Areas with cultural properties having a heritage value
- Conservation areas
By not complying with the act, you commit a crime and face imprisonment or fines. Confirm with your agent and the seller whether the land plot you intend to buy falls under any of these definitions.
2. The Registration of Real Estate Act
The Registration of Real Estate Act is valid for both foreigners and Korean citizens and explains how you should register a property and enter into the contracts.
You’ll find details about how the following should be contracted:
- Ownership of property
- Rental/lease opportunities
- Mortgages
- Easement (a person that rents land from a landowner for a shorter time)
3. The Foreign Exchange Transactions Act
As the name speaks, this act was created for monetary purposes. For example, you can find information about foreign transactions and international payments.
In short, the purpose of the act is to support the development of the national economy and to maintain a healthy balance of currency reserves, for example.
The Korean government explains more about the act on its website and you can also consult with a property lawyer how you should comply with the acts listed.
Documents Needed When Buying Land
Before you can finalize the purchase, you have to provide several documents that are related to the acts listed and the registration of the property in your name.
After you’ve signed the Sales & Purchase Contract (SPA), you must submit the following documents to the Si, Gun, or, Gu office (corresponding to a city, county, or district level):
- Signed sales contract
- Your Alien Registration Card
- A copy of the Land Register showing the seller’s name
Documents For Transfer of Ownership:
- Alien Registration Card
- Registration application
- Documents showing the reasons for registration (e.g. sales contract)
- Land Acquisition Report
- Registration certificate
Keep in mind that regulations change continuously and additional documents might be needed. Therefore, it’s important that you confirm the latest regulations with your agent and/or property lawyer.
Land Prices in Korea
Land prices have increased much in Korea in the past years. Chinese investors are some of the most active in the Korean market, which is not strange as you’re allowed to own land on a freehold basis.
With that said, locals and the government have discussed a potential ban on Chinese investors as prices have increased significantly and foreigners are generally not allowed to buy property in China, which is deemed unfair.
According to data released by the Ministry of Land, Infrastructure and Transport, Chinese land-ownership has increased 14 times, from 3.69 square kilometers in 2011 to 19.3 square kilometers in 2019.
Over the same period, the land prices increased 2.5 times, which is not modest. Maeil Business News Korea, on the other hand, claims that land prices increased by 8% from 2018 to 2019.
Below you can see how land prices increased from 2018 to 2019 in various cities according to the Korean authorities:
- Seoul: 5.29%
- Incheon: 4.03%
- Busan: 3.76%
- Daegu: 4.55%
- Jeju: -1.77%
The average square meter price for land was KRW 57,803 (USD 52) in 2019, according to the Ministry of Land, Infrastructure and Transport.
Taxes
Before you engage in real estate transactions, you must understand your tax obligation. Korea is currently proposing to increase the acquisition tax due to the influx of foreign investors.
Below I have listed some of the taxes and fees you have to pay when investing in land in Korea. Be sure to consult with your property lawyer for up-to-date information and insights on how you can potentially reduce the taxes.
1. Stamp Duty
The stamp duty is charged at a rate of KRW 50 to KRW 350,000 (USD 320), depending on the property value. Thus, the duty is almost negligible.
Instead, you’re also subject to a so-called acquisition tax as mentioned.
2. Property Acquisition Tax
The acquisition tax ranges between 1% to 4%, according to Santander Trade. For commercial property, the acquisition tax usually averages 4.6% and is paid when you acquire the property.
3. Value Added Tax (VAT)
A VAT of 10% is multiplied by the sales value when purchasing commercial real estate, for example, buildings (companies can be reimbursed).
The VAT should be paid by the seller but is sometimes passed on to the buyer.
4. Capital Registration Tax (Capital Duty)
A capital registration tax of 0.48% is levied when a company registers its incorporation or capital increase. The rate in Seoul is higher and 1.44%.
5. Annual Property Tax
An annual property tax of 0.07% to 5% is multiplied by the assessed value of the property. The rate differs depending on the value of the property and its location.
6. Capital Gains Tax
Capital gains are taxed at 11% of sales or 22% of gains, whichever is lower.
Finding Land for Sale in Korea
If you’re a foreign investor that doesn’t speak Korean, you’ll sometimes find it difficult to find a partner or agent that can help you buying land.
The reason is that local agents primarily focus on helping Korean buyers and not rarely have limited English skills.
Besides, some are just less interested in helping foreigners acquiring residential properties and land. This is something you might find applicable for multinationals as well and not only local agents.
With that said, I do recommend you trying to reach out to a handful of agents and see how they can help. Some examples are CBRE, Knight Frank, Cushman & Wakefield, and RE/MAX.
Even if I’m not a big fan of land listings as the amount is limited or information outdated, it can be worth checking these as well. Asia Property HQ can also support in presenting interesting land plots.
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