China’s real estate invasion
In February, two apartment units in Seocho-gu, an upscale district in southern Seoul, were sold at 3.2 billion won ($2.8 million), four to five hundred million won more than the market price of 2.7 to 2.8 billion won, at once. The transaction was noteworthy not just because of the price but also because the buyer was a Chinese. In order to purchase two units that one was right above the other, the buyer was willing to pay a premium. It is learned that there are more than 10 Chinese people living in the apartment.
Moreover, around this time, a dozen of Chinese buyers were looking at other luxury apartments in the area. Chinese people are already buying expensive homes in Seoul and the capital region. It was reported in the media several times that Chinese people were buying in landmark high-rises in Seongsu-dong and Hapjeong-dong and townhouses in Paju, Gyeonggi.
Real estate market indicators show Chinese people’s buying trend. In the report on foreign buyers’ land acquisition in Seoul published last year, Chinese people showed highest rate of growth, purchasing 56 percent more than the previous year. Their transactions were most active in Gangnam and Seocho. At this rate, Chinese people could become the big shot in the Seoul real estate market and influence the housing price. When they buy at higher prices for any reason, prices in the area would go up as well. Their activities will surely lead to excessive real estate boom.
In fact, as Chinese money flew into Vancouver, Canada and Sidney, Australia, the housing prices went up by 20.4 percent and 13.7 percent last year respectively. Last year, Australia banned real estate purchases of foreigners living abroad — a measure targeting Chinese people. When a foreigner buys a real estate using a local as a proxy, it is subject to 25 percent fine. Hong Kong and Singapore experienced the same trouble because of China, which is why they now impose additional 15 percent acquisition tax on real estate transaction of foreign buyers.
It is not as serious in Korea, but no one knows when Chinese buyers will dominate Korean real estate market. Latest development in China encourages Chinese people’s purchases of Korean real estate. Many wealthy Chinese want to move their assets abroad after going through Xi Jinping’s war on corruption. Korea’s close proximity to China is a great advantage to them. Signs have just begun to show, but someone in the Korean government needs to start thinking about whether to be hardline like Australia or just leave as it stands.
JoongAng Ilbo, Jun. 21, Page 31
*The author is an editorial writer of the JoongAng Ilbo.