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Last Updated: Feb 17, 2012




South Korean house prices bounced back in 2011, after a slow second half of 2010. Housing starts and transaction volumes were strongly up.  House prices rose by 6.86% (2.60% in real terms) during 2011, according to the Korean Statistical Information Service (KOSIS). The Seoul house price index was up by 0.29% (-3.72% in real terms) during 2011, less than the national house price index.

The government has unveiled another set of measures in helping the housing market, including cutting the levy on profits made from home sales by multiple homeowners from 50% - 60% to 6% - 35%. This is the third installment of housing market boosting measures by the government, following the slashing of home purchase taxes in March 2011 and the easing of real estate lending restrictions in August 2010.

South Korea homesThe key rate interest rate has been unchanged at 3.25 from June 2011. The rate has attracted borrowers, with 2011 apartment building sales rising 41.8% to 285,000 units. The measures also helped construction permits rise 42.2% to 549,594 permits, according to the Ministry of Land, Transport and Maritime Affairs (MLTM).  Household debt rose to 12.7% during the year to March 2011.

South Korea’s economic growth slowed to 3.6% in 2011, after 6.16% in 2011.  Inflation remains high at 4.16%.

Analysis of South Korea Residential Property Market »


RENTAL YIELDS
Last Updated: May 24, 2013



We tend to experience difficulties in assessing the buying prices for apartments and villas in Seoul, due to the paucity of offers for sale in English language, and this year has been no exception. Our research suggests that both upper-end apartments in central Seoul and villas rent for around US$29 per month per square metre (sq. m.).

Because of the difficulty of finding buying prices, we have no gross rental yields figures for Seoul.

Read Rental Yields  »



TAXES AND COSTS
Last Updated: Nov 25, 2013



Rental Income: Rental income tax is from 6% to 38% for limited liability companies and 10% to 22% for stock companies. Value Added Tax on gross rent is 10%.

If the rental income is less than KRW24 million (US$22,642) and the property value is assumed to be under KRW900 million (US$849,057), a special method for the calculation of the personal taxable income is used. In the sample calculation provided, effective income tax amounts to 2.48% of the gross rent, given that the annual rental income is KRW20.7 million (US$19,528) and under certain assumptions.

Capital Gains: Capital gains taxes are around 6% to 38%. A special deduction applies if the property is held for more than three years.

Inheritance: The inheritance tax is between 10% and 50% depending on the property value.

Residents: Residents are taxed on their worldwide income at progressive rates, from 6% to 38%.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: Nov 26, 2013



Total roundtrip transaction costs can range from 21.45% to 22.90%. The realtor’s fee is regulated at 0.20% to 0.90%, but actual payments are typically higher. The 10% Value Added Tax (VAT) is imposed on all properties. Buyers must also purchase National Housing Bonds worth 5% of the property value; typically sold immediately at 10% to 15% discount. All costs are paid by the buyer.

Read Buying Guide  »



LANDLORD AND TENANT
Last Updated: Dec 03, 2007



The rental system in South Korea is pro-landlord.

Key Money: With any of the standard rental schemes, the landlord receives a huge amount of money up front, protecting him from erring tenants. In the 'wolse 2' system (the most common for expats), the entire rent is paid upfront, with no refund for early termination.

Tenant Security: Tenants are expected to move out of the property as soon as the lease term expires and the key money returned.

Read Landlord and Tenant  »



ECONOMIC GROWTH
Last Updated: Feb 17, 2012


Slower growth in 2012

South Korea homesSouth Korea’s economy - the world’s 7th biggest exporter - grew by 6.16% in 2010. But in 2011 exports were affected by the won’s appreciation to a peak of US$1=KRW 1,058.9 in July 2011. Economic growth slowed to 3.6%, with exports up only 12.5%.

To slow the won’s rise the government increased foreign reserves, and by December 2011 the won was back down to US$1=KRW 1,148.30.

The Bank of Korea’s key rate hike to 3.25% of June 2011 is likely to be maintained to prevent further currency depreciation, which could heighten inflationary pressures.






  • Pro-landlord rental market
  • High yields in Seoul
  • Stable & developed economy
  • Low effective rental income tax
  • High transaction costs
  • Profit repatriation limits
RESIDENTIAL PROPERTY FACTS
Price (sq.m): n.a. For a 120 sq. m. property, usually an apartment.
Rental Yield: n.a. For a 120 sq. m. property, usually an apartment.
Rent/month: $2,778 For a 120 sq. m. property.
Income Tax: 2.48% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 22.90% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: 38.00% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Pro-Landlord Rating is based on a detailed study of each country’s law and practice.

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