Chinese buyers snap up more Korean real estate

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Chinese buyers snap up more Korean real estate

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Chinese investors who are well known for buying overseas properties are pouring money into Korea’s real estate market.

The size of properties owned by Chinese investors rose faster than other foreigners, from 3.7 million square meters (370 hectares) in 2011 to 16.9 million square meters in 2016, an increase of 360 percent, a report by KB Financial Group showed. In the same period the amount of property owned by foreigners overall spiked 24 percent, from 187.1 million square meters to 232.2 million square meters.

“The number of foreigners buying lands and properties in the country rose starting from 1998, since the government found need to attract more foreign investments after being hit by the financial crisis,” said Kim Yeol-mae, a researcher at KB. “Recent data showed that the number of Chinese investors is rising at a faster rate after various regulations on foreigners purchasing real estates in the country were eased, while the number of Chinese residing in the country continues to rise.”

According to the research, the number of properties owned by foreigners jumped 49 percent from 70,781 in 2011 to 105,413 last year. During the same period, the number of those owned by Chinese skyrocketed 486 percent from 3,448 to 20,208. Americans still owned the most amount of the property in the country, however, accounting for about half of the total, or 49,274.

“It appears that Chinese are investing in foreign real estate markets, including Korea’s, as the prices in major cities in China like Shanghai and Beijing are rising fast, while its government also has toughened regulations to reduce the number of speculators,” Kim said.

According to JLL, a global real estate firm, overseas investment from China in residential, commercial and industrial property rose 53 percent year on year to $33 billion last year.

A researcher at the KB Financial Group suggested that the government and investors need to monitor sales closely since Chinese homebuyers have boosted real estate prices significantly in other countries as well as in Hong Kong and Canada in the past.

In fact, Canada’s British Columbia introduced a 15 percent property transfer tax on foreign real estate buyers in Vancouver to reduce the rising housing costs mainly driven by Chinese in August. Housing prices in Vancouver jumped more than 32 percent from 2015 to 2016.

“Other places like Hong Kong, Singapore and Australia are also toughening their regulations on foreign investors buying properties in their countries, including rising taxes, as their real estate market prices rose significantly,” Kim at KB said. “Their prices rose as such countries introduced various measures to attract more foreign investment, as they were experiencing a slow economy prior to experiencing a price hike. Korea is not seeing the direct impact coming from foreign investors at this point but the number of such foreigners is rising rapidly and it might affect the local real estate market as well later on.”

Even though the increase in foreigners in the country can have the negative impact of causing a bubble in the local real estate market, the research also suggested that it be a good chance for Koreans to invest in the market as demands for rents might also rise from the recent trend.

According to the government, the number of foreigners living in the country surpassed 2 million last year and accounted for 3.9 percent of the total population. The number of Chinese and Korean Chinese are growing at a faster rate and they account for about 2 percent of the total population.


BY KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]

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