Property Ownership in South Korea: Rights and Responsibilities of Foreign Buyers

Guide to Purchasing Real Estate in South Korea for Foreign Buyers

Yulia Pettai, head of Gate to Korea, a real estate company, provides a comprehensive guide to buying property in South Korea and the rights of foreign buyers.

Legislation and Consumer Rights

• Citizens of various countries, including Russia, Ukraine, Belarus, and Kazakhstan, have the right to fully own residential and commercial real estate in South Korea.
• Acquiring real estate in special zones requires permission from local authorities.

Purchasing Process

• The purchase can be made in person in Korea or remotely through an authorized representative.
• Non-residents can purchase real estate without a visa if they make a full prepayment.
• Mortgage lending is available with a long-term visa or permanent employment status.

Advantages for Foreign Buyers

• Under the Immigrant Investor Scheme for Real Estate (IISRE), investors can apply for residency (F-2 visa).
• An investment of at least 500 million Korean won in real estate under construction opens up this opportunity.

Privileges of Property Ownership

• Having a resident card allows foreigners to work officially, run a business, study, and receive medical and social benefits.
• These privileges make acquiring real estate in Korea an attractive investment for foreign investors.

The rights of investors in South Korea are quite broad and allow them to purchase real estate both for themselves and for their relatives. Investor visa holders have the opportunity to live in different parts of the country or outside the country without staying permanently in the housing they purchased under the IISRE program. However, it is important to remember the obligation to notify immigration authorities of a change of residence.

Legal formalities after the purchase

After purchasing real estate in South Korea, foreign investors must complete a number of legal procedures. For example, non-residents who become owners of housing or land plots must notify the local administration of their purchase within 60 days. Failure to comply with this requirement may result in a fine of up to 5 million South Korean won (almost $5,000). It is also important to note that acquiring land through auctions or inheritance also requires notifying the local authorities within six months.

Obligations of the participants in the IISRE program

Participants in the IISRE program are required to maintain ownership of the acquired property for five years. They must also regularly pay utility bills and an annual property tax, which is collected during certain months and depends on the type and size of the housing, ranging from 120,000 to 240,000 South Korean won ($100–200) per year.

Buying without the involvement of a realtor

Citizens of Russia can purchase real estate in South Korea without the help of a realtor, but a notary is required to formalize the transaction. Due to the language barrier and the complexities of local legislation, buying property independently can be challenging. There are real estate agencies where Russian-speaking specialists assist at all stages of the transaction.

The importance of working with a realtor

The realtor hired by a foreign buyer represents their interests, helps select suitable properties, organizes viewings, negotiates with sellers, provides advice on contracts and taxes, coordinates the transaction process, and prepares the necessary documents for government agencies and banks.

Real estate rental in South Korea

A realtor who works through their real estateagency can help with renting a newly purchased property. There are two unique types of rental housing in South Korea: cheonse (전세) and wolse (월세).

Chonse

According to the terms of the chonse, the tenant pays a deposit of 50% to 70% of the apartment's value and can live in it rent-free, usually for two years. The landlord receives a significant amount in advance.

Waltz

In the case of a lease, a monthly payment is required plus a deposit, which is returned after the rental period ends. Monthly payments depend on the location and size of the property. In case of non-payment by the tenant, the amount may be deducted from the deposit.

Buying real estate in South Korea for foreigners

For foreigners purchasing real estate in Korea, the process is regulated by several laws. It is necessary to open a bank account, sign a contract, and inspect the property - these are the first steps. A special Korean currency account is required for transactions. It can be opened quickly and free of charge by presenting the original passport. Subsequently, the account is used for transferring funds when buying real estate.

Key points:

• Realtors can assist with renting out newly acquired property.
• There are two unique types of housing rental: jeonse (전세) and wolse (월세).
• For foreigners purchasing real estate in Korea, the process is regulated by several laws.
• It is necessary to open a bank account and sign an agreement
• A special Korean currency account is needed to conduct transactions.

Purchasing real estate abroad

When planning to purchase real estate abroad, it is essential to strictly adhere to the laws of the country from which the funds are being transferred. Finalizing the transaction requires the conclusion of a contract, for which the assistance of a lawyer or notary will be necessary.

Details in the sales contract

• Cost of the object
• The amount of the deposit
• Date of deposit payment
• Remaining amount
• Date of occupancy
• Seller's bank account details

It is recommended to discuss the date for making the deposit with the realtor in advance. It is also important to consider the conditions related to the buyer, including the deadlines for making utility payments and the distribution of responsibilities between the parties.

Stages of payment for the transaction

After signing the contract, the buyer must make a deposit, usually amounting to 10% of the total cost of the property. The seller is required to provide their passport and documents for the property, while the buyer must fill out a purchase application, certified by a notary.

Verification of the facility and formalities

The payment for the transaction occurs in stages. The seller, buyer, and notary must conduct a joint inspection of the property. The notary ensures that all necessary documents are in order, including data from the land registry, the legality of the construction, the intended use of the land, paid taxes, and other formalities.

It is also important for the notary to verify that the seller is the legal owner of the property. After a successful check, payment is made according to the terms of the contract, and all documents are entered into an electronic system for possible future access.

Buying real estate in South Korea: A detailed guide to the process and requirements

Acquiring real estate in South Korea requires adherence to strict legal procedures. The main documents include registration papers that contain information about the owner, the year of construction, and the exact address of the property, as well as any obligations and restrictions imposed on the property. It is important to note that each unit of real estate, whether it is an apartment or a parking space, must be registered in the relevant cadastre, which details the use of resources such as electricity.

A critical step is to verify the actual square footage of the premises, which prevents possible future disputes. This process can take up to five days and necessarily requires notifying local authorities of the foreign investor's intentions to comply with foreign exchange laws.

Payment for real estate

Payment for real estate occurs in three stages: a deposit, an interim payment, and the final amount.

It is essential to be well-informed about all requirements and taxes. After completing the acquisition process, it is important to notify the district administration within 60 days by providing a notarized copy of the document, a completed application, the purchase agreement, a certificate confirming ownership, and a notarized copy of that certificate.

Tax expenses when purchasing real estate in South Korea

Purchasing real estate in South Korea also involves certain taxes. The new owner will have to pay three different taxes: on the purchase of real estate, on the support of regional education, and on the financing of agriculture and fishing industry. The value of the real estate purchase tax varies from 1 to 3% depending on the value of the property and its area. The regional education improvement tax is 10% of the real estate purchase tax. The third tax is assessed only if the area of the property exceeds 85 square meters.

Example of a tax situation

For example, if you purchased an apartment with an area of 59 square meters for 435 million Korean won ($430,000) in the Seoul area, you will need to pay a total tax of 4.785 million Korean won, or $4,700 – a property purchase tax of 1% (4.45 million Korean won or $4,300) and a regional education tax of 0.1% (435,000 Korean won or $430). The agricultural and fisheries support tax is not levied since the apartment's area does not exceed 85 square meters.

However, if an apartment costs 835 million Korean won, has an area of 59 square meters, and is located in the southwestern part of Seoul, in the Yeongdeungpo district, the property acquisition tax will be 2%, and the regional education tax will be 0.2%. The total tax for an apartment of the same size but in other districts, such as Songbuk-gu, Gangbuk-gu, Dongjak-gu, Socho-gu, and Seongpa-gu, will vary.

Results

It's important to remember about the variable c.

Purchasing real estate in South Korea

This is a responsible step that comes with obligations to pay various taxes. In addition to the usual taxes on agricultural improvements and fishing, buyers will also need to consider other additional expenses. Among them are stamp duty, notary fees, agency commissions, and translation services – all of which must be taken into account when purchasing property.

The size of the realtor's commission

It depends on the property value. There is a certain percentage that realtors charge for their services based on the price of the property. For example, for properties up to 50 million Korean won, the rate is0.6%...and for objects over 900 million, it increases to...0.9%.

Additional expenses when purchasing

When purchasing real estate in South Korea, it is important to consider additional expenses. For example, when buying a two-bedroom apartment in Seoul for $270,000, in addition to the main cost of the property, the buyer will have to pay for expenses such as opening a bank account, property purchase tax, stamp duty, costs for government bonds, realtor commission, notary fees, and translation services.

Legal aspects

Foreign citizens have the right to purchase real estate in South Korea in accordance with the laws of the country. However, there are certain restrictions, and to purchase land in some areas, you must obtain prior approval from the local authorities. Violation of this rule may result in serious penalties, up to and including imprisonment.

Requirements for non-residents

Non-residents of the country can only become property owners without a visa if they pay for the property in full. Additionally, they need to invest in government bonds for an amount ranging from1.3%to3.1%of the value of the property.

Owners' responsibilities

Property owners are required to notify the district administration of the purchase of a property within 60 days. Violating this rule may result in a fine of up to5 million Korean wonTherefore, it is important to approach the process of buying real estate in South Korea responsibly, taking into account all additional expenses and legal requirements.

Conclusion:

Based on the results of the study, we can conclude that purchasing real estate in Korea is a legal and affordable process for foreign buyers. However, it is necessary to take into account the obligations that come with owning real estate in the country, such as notifying the state of the purchase and paying the annual property tax. It is also worth noting that for a more successful sale and purchase transaction, it is advisable to seek the help of professionals or real estate agencies to prevent possible misunderstandings and mistakes. Based on this, we can confidently say that buying real estate in Korea is a great opportunity for those who want to invest in an attractive and developing market in Korea.