Core Viewpoint - The South Korean government, led by President Lee Jae-myung, is implementing new regulations to restrict foreign purchases of residential properties in response to soaring housing prices in the Seoul area. The new rules will take effect on August 26 and will last for one year [2][5]. Summary by Sections New Regulations - The Ministry of Land, Infrastructure and Transport has designated the entire Seoul area, along with 23 cities and counties in Gyeonggi Province and 7 districts in Incheon, as "foreign land transaction permission zones." Foreign individuals, companies, or government entities must obtain local government approval to purchase residential properties larger than 6 square meters in these zones [2][5]. - Approved buyers must move in within four months and reside for at least two years. Violations can result in fines up to 10% of the property price and potential cancellation of transaction permits [2][5]. Foreign Investment Trends - The influx of foreign investors has significantly impacted the housing market, with transactions rising from 4,568 units in 2022 to 6,363 in 2023, and further to 7,296 units [5]. - In the first four months of 2023, foreign investors applied for 4,169 property transaction registrations, with approximately 17,500 foreigners purchasing real estate in 2022, marking an 11.9% increase from 2023 [5]. Government's Response to Market Dynamics - The government’s new policies are a response to the increasing non-residential demand from foreign investors, which has contributed to rising housing prices [5][6]. - Previous measures included limiting housing loans for South Koreans to a maximum of 600 million KRW (approximately 318,000 RMB) and requiring buyers to move in within six months to curb speculative buying [6][7]. Market Fluctuations - The South Korean housing market has experienced significant volatility, with prices soaring over 40% from 2020 to 2021, particularly in Seoul, where some areas saw price increases of 50% [9]. - Following a period of rising interest rates, the market began to cool, with the average price of apartments and multi-family homes dropping by 18.63% in 2023, the largest decline on record [10]. Future Outlook - The Bank of Korea reported that housing prices outside the Seoul metropolitan area are expected to decline, while prices in the capital region have shown slight increases in early 2023 [11]. - The effectiveness of the new regulations in curbing price increases remains to be seen, especially as the gap between housing prices in Seoul and other regions continues to widen [11].