How to Buy Real Estate In South Korea as a Foreigner
Who can buy property in South Korea?
Foreigners are allowed to purchase property in South Korea, including land, with rights comparable to those of local citizens. Once acquired, foreign property owners have the ability to sell, lease, or develop the property, as long as they adhere to local laws and regulations.
However, property taxation for foreigners may differ, particularly based on the type of property and the duration of ownership. Foreign buyers should be aware of potential tax implications, which can vary depending on factors such as residency status and how long the property is held. It is advisable to consult a tax expert to fully understand these obligations.
Do the research
Investing in South Korean real estate offers strong potential due to the country’s robust economy, rapid urbanization, and growing demand for housing in key cities like Seoul and Busan. South Korea is one of Asia's leading financial and technology hubs, attracting both domestic and international businesses, which drives demand for commercial and residential properties. The real estate market has shown steady growth, especially in metropolitan areas where limited land supply and high population density have contributed to increasing property values.
The government’s investment in infrastructure, such as expanding transportation networks, further enhances the appeal of real estate in developing regions. Additionally, South Korea's stable political environment, transparent legal system, and regulations favoring foreign investment provide a secure environment for property buyers. Rental demand is also high, particularly in Seoul, making real estate investment a viable source of steady rental income. With its strong economic fundamentals and growing urban population, South Korea offers attractive opportunities for long-term capital appreciation and real estate returns.
Here are some sought-after destinations for real estate investment in South Korea:
- Seoul - As the bustling capital of South Korea and a global metropolis, Seoul is a prime location for residential and commercial real estate. Districts like Gangnam, Itaewon, and Jongno are particularly popular due to their vibrant city life, accessibility to public transport, and modern infrastructure. Seoul offers a variety of real estate options, from high-end luxury apartments to commercial properties, making it a top choice for both investors and residents.
- Busan - Busan, South Korea's second-largest city and a major port, attracts both tourists and investors with its coastal beauty and vibrant culture. Popular areas like Haeundae and Gwangalli Beach are famous for their beachfront properties, making them ideal locations for luxury apartments, resorts, and second homes. Busan's growing economy and cultural significance offer attractive opportunities for real estate investment.
- Jeju Island - Known for its natural beauty, volcanic landscapes, and beaches, Jeju Island is a popular destination for both tourists and real estate investors. The island's relaxed atmosphere and scenic locations, such as Seogwipo and Hallim, make it an attractive spot for vacation homes and eco-friendly resorts. Its status as a popular tourist hub also provides potential for rental income.
- Incheon - As a gateway to South Korea with its international airport, Incheon is emerging as a major real estate hub. The Songdo International Business District is a modern, eco-friendly city within Incheon, offering cutting-edge technology and urban planning. Incheon's growing infrastructure, including the Free Economic Zone, is appealing for both residential and commercial property investments.
- Daegu - Located in the southeastern part of the country, Daegu is known for its historical significance and vibrant fashion and textile industries. Real estate in Daegu, especially in areas like Suseong-gu, is increasingly attracting both local and foreign investors looking for more affordable yet high-potential investments compared to Seoul and Busan.
- Gyeonggi Province - The suburban areas surrounding Seoul, like Suwon, Seongnam, and Yongin, provide more affordable housing options while still being close to the capital. Gyeonggi Province offers great residential opportunities for families and commuters who work in Seoul but prefer a quieter lifestyle outside the city's hustle.
Where to find properties online:
Financing
Foreigners can obtain mortgage loans in South Korea, though the process may differ from that for South Korean citizens and permanent residents. Many banks and financial institutions offer mortgage options to non-residents, but they typically require a larger down payment, usually around 40% of the property's value. Lenders also require proof of income and financial stability, which may include documentation of income from overseas sources. Additionally, lenders might request further documentation, such as tax returns or financial statements. The process can involve more stringent requirements, and working with a local financial expert can help navigate the complexities.
Due Diligence and Sales Contract
In South Korea, the property sales contract, known as the "매매계약서" (Maemae Gyeyakseo), is a legally binding document that outlines the terms and conditions agreed upon by both the buyer and the seller. This contract includes critical details such as the purchase price, payment terms, deposit amount, and specific property information, including any fixtures or inclusions. Once both parties sign the contract, it becomes legally binding, and the buyer usually pays a deposit, typically around 10% of the purchase price, to secure the agreement. The final transaction is then completed following the terms specified in the contract, including any additional payments and the formal transfer of ownership.
Before signing a property contract in South Korea, it is essential for buyers to carry out thorough due diligence, including property inspections and obtaining relevant disclosures. Working with a qualified legal professional, such as a real estate lawyer, is highly recommended to navigate the complexities of the contract and ensure compliance with South Korean laws and regulations. These experts can help identify any potential legal issues, assist with negotiating terms, and guide buyers through the settlement process, safeguarding their interests and ensuring a smooth transaction.
Property Buying Costs and Taxes in South Korea
| Transaction Costs | ||
| Who Pays? | ||
| Property Transfer Tax | 1.00% - 12.00% | buyer |
| Legal Fees | 0.50% - 1.00% | buyer |
| Real Estate Agent Fee | 0.40% - 0.60% 0.30% - 0.50% |
buyer seller |
| Costs Paid by Buyer | 1.90% - 13.60% | |
| Costs Paid by Seller | 0.30% - 0.50% | |
| ROUNDTRIP TRANSACTION COSTS | 2.20% - 14.10% | |
| Source: Global Property Guide, PWC, KPMG | ||
Footnotes to transaction costs table
The round trip transaction costs include all costs of buying and then re-selling a property - lawyers' fees, notaries' fees, registration fees, taxes, agents' fees, etc.
Currency:
South Korea uses South Korean Won. The exchange rate is at US$1 = KRW1,377.9950 as of 21st October 2024.
Value Added Tax:
Value Added Tax (VAT) is levied at a flat rate of 10%.
Legal Fees:
Legal fees are around 0.50% to 1% of the property value. A typical lawyer will charge between 5 and 10 hours to prepare the sale agreement at the rate of between KRW100,000 (US$73) and KRW 250,000 (US$180) per hour of work.
Registration Tax:
Registration tax for acquisition of rights by purchase is 1.00% - 12.00%.
Real Estate Agent's Fee
Real estate agent's fees are generally around 0.70% to 1.10% of the property value and are largely shared between buyer and seller.