Government moves to tighten transaction reporting amid controversy over foreign speculation, checking residency status and funding sources

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[Financial News] The government is expanding its oversight of foreign real estate transactions to the transaction-reporting stage. Foreign buyers will be required to report their residency status and details of overseas funding, and in Land Transaction Permit Zones, both Korean and foreign buyers must submit funding plans and supporting documents.
On the 9th, the Ministry of Land, Infrastructure and Transport announced that amendments to the Enforcement Decree and Enforcement Rules of the Act on Report on Real Estate Transactions, Etc., reflecting these changes, will take effect on the 10th. The ministry plans to use the new rules to check for illegal capital inflows and circumvention schemes in foreign transactions, and to strengthen post-transaction oversight through targeted investigations and inspections.
Under the amendments, foreigners who sign a contract to buy or sell real estate in Korea on or after February 10 must submit their residency status (visa type) along with their domestic address or proof that they have resided in Korea for at least 183 days when filing the transaction report. Until now, reporting for foreign buyers only confirmed nationality, making it difficult to grasp their actual residency or living situation.
For transactions that require a land transaction permit, the requirements for submitting a funding plan have been revised. Both Korean and foreign buyers must submit a funding plan and supporting documents when reporting the transaction. The reporting obligation now covers overseas deposits and loans, the names of financial institutions involved in overseas funding, and even proceeds from the sale of stocks, bonds, and virtual assets.
An official at the Ministry of Land, Infrastructure and Transport (MOLIT) stated, "Foreign buyers will have to specify their funding sources, financial institutions, and visa types in detail, which will increase the burden on speculative transactions," adding, "For Korean buyers, the obligation to submit a funding plan previously focused on Speculative Overheating Districts, but we have now extended it to Land Transaction Permit Zones as well." On the possibility of further regulation, the official clarified, "We are not at the stage of considering restrictions on foreign acquisitions or additional taxation."
The list of documents to be attached when reporting a transaction will also be expanded. Regardless of nationality or whether the property is in a Land Transaction Permit Zone, anyone who signs a real estate sale contract must submit the contract itself and documents proving payment of the down payment, such as a receipt. When the parties file a joint report for a direct transaction without a broker, the existing exemption from attachment requirements will continue to apply. MOLIT plans to conduct follow-up inspections focusing on whether buyers in permit zones are fulfilling their obligation to reside in the property and whether any overseas funds have been brought in illegally.
Experts, meanwhile, believe the measures are likely to significantly curb speculative transactions. Choi Won-cheol, head professor of the Advanced Program in Future Real Estate Development at Yonsei University, noted, "Speculative transactions are likely to decrease, particularly in some areas that have seen sharp price increases, such as southern Seoul’s Gangnam area," while adding, "However, the overall impact on purchases made for genuine residential purposes will likely be limited."
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en1302@fnnews.com Jang In-seo Reporter