01 March 2006

Korean Property Investment Freed Up

South Koreans will be able to buy housing units overseas beginning Thursday without being restricted by the value, as long as the purchases are for residential purposes, the Ministry of Finance and Economy (MOFE) said on Wednesday.

They now can purchase luxurious homes and even castles for residential purposes, hold it for a lifetime, and even let their children inherit the property. They had previously been obliged to sell their overseas real estate within three years after returning to Korea.

These are part of ministry's foreign exchange liberalization steps aimed at easing the glut of dollars in the local foreign exchange market. The government wants to increase flows of dollars out of the country to help slow the pace of the won's gains against the dollar.

The government raised the offshore real estate purchase cap to $1 million on Jan. 9 from $500,000 of last July. The ceiling is totally scrapped now.

Still, an individual buying a home worth more than $300,000 is obliged to report the purchase to the National Tax Service (NTS).

``The purchase of overseas real estate increased, but it is not yet sufficient,'' said Kwon Tae-gyun, MOFE director general in charge of the International Finance Bureau. There were 4.3 purchases of such overseas real estate per month on average between July and December 2005, with the figure rising to 13 last January.

``We're also planning to liberalize in stages the purchase of overseas real estate for investment purposes from next year,'' the MOFE official said.

On top of easier purchases of homes in foreign countries, individuals will be able to make as much outbound foreign direct investments as they want and buy any kind of foreign securities. The ministry is planning to set up measures to encourage overseas investment in the service sector and financially support energy project overseas.

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