Property Market Overview

South Korea became one of the world's major economies during four decades of authoritarian rule, eventually shifting to multi-party politics in 1987. As a testament to its transition to first world status, South Korea was admitted into the Organization for Economic Cooperation and Development (OECD) in 1996, the only Asian member aside from Japan.

In 2008, South Korea was officially categorised as a developed economy by the FTSE. GDP per capita was US$20,000 in 2007 with a population of 48.5 million. South Korea's rapid economic growth was interrupted by the Asian crisis in October 1997 but the economy quickly rebounded with an average of 9 per cent economic growth from 1998 to 1999, followed by growth averaging 4.8 per cent from 2002 to 2006. In 2007, the economy expanded by almost 5 per cent.

Korea lacks the inflationary problems suffered by some of its neighbours. Overall inflation for 2008 is expected to be somewhere around a comparatively tame 4 per cent, although this is slightly over the government's target of 2.5 per cent to 3.5 per cent. However, things may not be quite as rosy in 2009, as Korea's financial market is seriously beginning to struggle in the wake of the global economic slowdown. It already appears to be having a major impact on the country's property market and house price growth has been slowing to a standstill since 2007. House prices increased by just 4.4 per cent to the 2nd quarter of 2008 compared to the same period in 2007. When inflation is figured in, house prices actually dropped by 0.4 per cent. Although not much in-and-of-itself, it is a major decline considering property enjoyed a 12 per cent year-on-year price rise to Q1-2007, or 9.8 per cent in real terms.

South Korea's government has traditionally sought to tightly control the country's housing market. When growth rates have threatened to overheat in recent decades, it generally intervenes and cools the market by raising taxes, adding zoning restrictions and adding disincentives for property speculators. In its latest move, the government has been stripping away regulatory red tape and slashing taxes in an effort to boost the market. However, although the moves are not expected to be able to prevent house price drops in 2009 they have created a more favourable environment for overseas property buyers.

At present, foreigners can now buy freehold in South Korea. That said, it is still advisable for foreigners to make their property purchases through a limited liability or a stock company as this will make it more convenient to repatriate income generated from the property. Other moves being implemented by the Korean government are set to make life easier for foreigners living in the country. They include the development of a series of first-rate educational facilities and hospitals catering to foreigners across the country.

The country's president revealed recently that it is to drastically overhaul labour sector practices, saying many foreign investors perceive labor relations as a big stumbling block to investment. Those who do opt to invest in Korea can expect to pay rental income tax from 9 to 36 per cent if they hold a limited liability companies or 13 to 25 per cent for stock companies. Value Added Tax on gross rent is 10 per cent. Capital gains taxes are set between 9 per cent and 36 per cent for any property which has been held for more than two years. One regulatory stipulation which looks likely to be retained is the anti-speculation, capital gains tax on properties held for less than a year of 50 per cent which can climb to 60 per cent for second homes.

Major property investment regions
Seoul, Busan

Upcoming markets
Jeju

SEOUL

Seoul has long been Korea's economic and cultural focal point and with a population of over 10.5 million, which doubles when its satellite cities and broader suburban area are taken into account, it has cemented its position as one of Asia's most important urban centres. Since its foundation in the 14th century, Seoul has been occupied by the Japanese and twice by Communist forces during the Korean War. However, it has been practically rebuild over the past two decades and is now one of Asia's most modern metropolises.
Read the latest analysis of the Seoul property market.

BUSAN

Busan, previously known as Pusan, is South Korea's second largest city and home to the nation's main seaport. Busan attracts tourists more for its natural heritage such as hot springs, city beaches and nature reserves than for its limited historical sites. It is more laid back than the somewhat hectic capital and its flourishing port sees sailors from the four corners of the world regularly climbing ashore. It has a population of just under four million people and is more competitively priced that Seoul.
Read the latest analysis of the Busan property market.

JEJU

Jeju is a volcanic island, 130 kilometers from the southern coast of Korea renowned for its culturally distinct people and stunning natural environment. It is both the largest island and smallest province in Korea and is home to the country's the tallest mountain, the dormant volcano of Hallasan.
Read the latest analysis of the Jeju property market.

Essential information

Location
South Korea lies in East Asia on the southern half of the Korean Peninsula. It shares a land border with North Korea to the north while China and Japan are a short distance across the sea to the west and southeast respectively.

Area
Total: 98,480 sq km
Land: 98,190 sq km
Water: 290 sq km

Population
48,379,392 (July 2008 est.)

Language
Korean is the country's first and most widely spoken language. However, the country enjoys strong English proficiency, due to the fact that it is widely taught in junior high and high school.

Religion
Christians make up the largest single religion in Korea at 26.3 per cent, although this is split between Protestant (19.7 per cent) and Roman Catholic (6.6 per cent). Buddhism accounts for 23.2 per cent, other or unknown 1.3 per cent and none 49.3 per cent.

Currency/Money
The currency in Korea is the Won, which is denoted by the international symbol ?. It is generally shortened in English typeface to (KRW).

Climate
South Korea has humid continental climate and humid subtropical climate. The whole country is impacted by the East Asian monsoon, which brings about high precipitation in summer during a short rainy season called 'jangma'. Temperatures drop significantly during winter and normally bottom out in January. In Seoul, the average January temperature range is -7 ?C to 1 ?C. This contrasts considerably with the average July temperature range, which is a comfortable 22 ?C to 29 ?C.

International dialling code
82

Capital
Seoul

Electricity
110V / 220 V

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History

Korea became and independent, unified state when unification in the 7th century from three predecessor Korean states and remained thus until the 20th century. In 1905, following the Tsarist Russia's defeat in the Russo-Japanese War, Korea became a protectorate of imperial Japan and was annexed as a colony five years later. It was not until the end of World War II that it finally regained its independence. However, the country was soon split between a Republic of Korea (ROK) in the south and a Communist-style military government in the north (the DPRK). War broke out between the two sides with the US backing soldiers from the ROK and China and the Soviet Union assisting the DPRK. An armistice was eventually signed in 1953, splitting the peninsula along a demilitarised zone.

While North Korea's economy began to falter, the south achieved rapid economic growth. South Korea today is a fully functioning modern democracy which has been working to rebuild relations with the North. In June 2000, a historic first North-South summit took place between the South's President KIM Dae-jung and the North's leader KIM Jong Il.

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Government

South Korea's government is split into three branches: executive, judicial, and legislative. The executive and legislative branches operate primarily at the national level, although ministries in the executive also carry out regional functions. Local governments enjoy a level of autonomy and have their own executive and legislative bodies. The structure of the South Korean government is dictated by the country's constitution, which has been revised on a number of occasions since being drafted 60 years ago. South Korea has a presidential system with an independent chief executive and has successfully developed into a liberal democracy since the 1960s and the first direct election was held in 1987.

Economy

South Korea been enjoying rapid economic growth since the 1960s and now ranks among the world's most developed, high-tech economies. At the end of the Korean War the country had a GDP per capita comparable with the most impoverished African nations. One of the most dramatic u-turns in world economic history saw South Korea become one of a handful of world's trillion dollar economies.

South Korea owes its economic miracle to a system of close government/business ties including directed credit, import restrictions, sponsorship of specific industries, and an industrious population with a high rate of productivity. The government promotes the import of raw materials and technology at the expense of consumer goods and encourages savings and investment over consumption.

South Korea was hard-hit by the Asian financial crisis of 1997-98 but was one of the first to bounce back. GDP dropped by 6.9 per cent in 1998, but recovered by 9.5 per cent in 1999. Led by consumer spending and exports, growth in 2002 was an impressive 7 per cent, despite anemic global growth. Between 2003 and 2007, growth moderated to about 4-5 per cent annually. As with elsewhere in the continent, South Korea's economy has cooled in the face of the latest global economic slowdown and its impact has been felt in the volatile property market in particular. However, the government has been implementing a range of economic reforms to encourage foreign investment and this resilient country should be one of the first to emerge on the far side of the slowdown.

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Visas

South Korea provides nationals from a list of 109 countries and territories, including all developed western nations, with visas on arrival valid for 30 to 90 days. For those wishing to visit just Jeju the rules are even less restrictive - citizens of just 11 countries require prior approval. However, the South Koreans take a dim view of those who overstay and it is extremely inadvisable to do so even by a single day. Those who do overstay can expect to incur heavy fines, possible jail time and a ban from re-entering.

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Healthcare

There are no vaccinations officially required or recommended for visitors to South Korea although Hepatitis A, which can be transmitted through food or water, should be a concern regardless of what region of the country you go to. The Centre for Disease Control designates the prevalence of infection in Korea to be intermediate. Korea has one of the highest rates of traffic deaths and motorists are notoriously reckless.

The range and quality of hospitals and healthcare professionals is excellent, although many will not be able to communicate in English once you go outside the larger hospitals in main cities.

Travel

South Korea has seven international airports - Busan, Cheongju, Daegu, Jeju, Muan, and Gimpo and Incheon Airports in Seoul. Incheon International Airport, an hour's drive from Seoul and is the largest in South Korea. It enjoys numerous connections around the world and is extremely well designed.

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