Land and apartment prices on Jeju Island have shot up in the wake of active Chinese investments in the nation’s smallest province over the past few years.
The island, with an area of about 1,850 sq km, is similar in size to Hongcheon-gun — one of the 11 major districts in Gangwon Province.
As a result, it is natural to see a spike in property prices in the wake of aggressive purchases by investors from China, along with an influx of Chinese tourists to the island.
According to the Korea Appraisal Board, Jeju saw the highest rise in apartment prices among major districts nationwide, at 10.41 per cent over the past 11 months.
Land prices in the region climbed 2.81 per cent, the second highest after Daegu.
Since February 2010, Chinese and other foreign investors to Jeju have been entitled to obtain permanent residency five years after they invest.
A legal loophole is that the permanent residency status is granted even if the investors do not live in the province.
This lax rule possibly attracted the remarkably rapid inbound investment.
The authorities don’t appear to concerned if these apartments in Jeju and Seogwipo cities on the island are vacant and the land idle for years, as long as it does not contaminate the natural scenery.
A similar case happened in Australia.
News reports have noted that the average house price in Sydney peaked at about A$1 million (S$1.01 million) last year on the back of active Chinese investment.
But the Chinese investors are said to have exited the city in droves due to the economic slowdown in the Asian superpower.
Their retreat brought about a 1.4 per cent drop in housing prices last month, bursting the real estate bubble.
The Jeju Provincial Government should be extremely alert and revise regulations, if necessary, to prevent local investors and residents from becoming adversely affected, if a similar situation arises.
Current regulations of the island allow overseas investors to sell their property assets any time, regardless of the permanent residency status.
The nation’s real estate market has in the past experienced several bubble bursts, which bankrupted many buyers who are still reeling under heavy mortgage debts.
The property market that was bullish this year is about to enter a correction phase again. The authorities should be prepared.
The Korea Herald is a member of The Straits Times media partner Asia News Network, a grouping of 22 newspapers seeking to promote coverage of Asian affairs.