South Korea: Overview

RENTAL YIELDS

Last Updated: May 07, 2009

No 2009 South Korean yields

We tend to experience difficulties in assessing the buying prices for apartments and villas in Seoul, and this year has been no exception. Our research suggests that upper-end apartments in central Seoul rent for around US$21.57 per month per square metre (sq. m.), while villas rent for around US$18.98 per month per 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: Jan 05, 2009

South Korean taxes are from moderate to high

Effective Tax Rate on Rental Income
Monthly Income	US$1,500
Tax Rate	15.1%
Click here to see a worked example
Source:		Disclaimer

Rental Income: Rental income tax is from 8% to 35% for limited liability companies and 13% and 25% for stock companies. Value Added Tax on gross rent is 10%.

Capital Gains: Capital gains taxes are around 9% to 36% for properties held for more than two years.

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

Residents: Residents are taxed on their worldwide income at progressive rates, from 8% to 35%.

Read Taxes and Costs  »

BUYING GUIDE

Last Updated: Dec 03, 2007

Buying costs are high in South Korea

Total roundtrip transaction costs can range from 20.57% to 22.42%. The realtor’s fee is regulated at a maximum of 0.6%, but actual payments are typically higher. The 10% Value Added Tax 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

South Korean landlords benefit from key money

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: Oct 23, 2008

Financial meltdown drags economic growth

The financial crisis has dragged economic growth down to 4.3% during the year to the end of the second quarter of 2008. GDP growth is expected to be around 4.3% in 2008, and 4% in 2009.

South Korea became one of the world’s major economies during four decades of authoritarian rule, eventually shifting to multi-party politics in 1987. As a testament to its transition to first world status, South Korea was admitted into the Organization for Economic Cooperation and Development (OECD) in 1996, the only Asian member aside from Japan.

In 2008, South Korea was officially categorized as a developed economy by the FTSE. GDP per capita was US$20,000 in 2007 with a population of 48.5 million.

South Korea's rapid economic growth was interrupted by the Asian crisis in October 1997. But the economy quickly rebounded with an average of 9% economic growth from 1998 to 1999, followed by growth averaging 4.8% from 2002 to 2006. In 2007, the economy expanded by almost 5%.

Inflation is tame compared to other Asian countries. It eased to 5.1% in Sept 2008 from 5.9% in June 2008, the highest since 1998. Overall inflation for 2008 is expected to be around 4%, above the government’s target of 2.5% – 3.5%.

South Korea started 2008 with a lot of enthusiasm, with the February inauguration of President Lee Myung-bak’s administration. As a former Hyundai Construction CEO and mayor of Seoul, he was expected to show strong economic and administrative competence, which his predecessor lacked. Lee ran on a platform of “Economy, First!”

However, President Lee’s first few months in office were wasted on the unpopular US regarding beef imports trade agreement. Violent protests shook the capital, and the debacle undermined his ability to enact tough economic reforms and deregulation.