This Overlooked Property Market Could Deliver 12–20% Growth — But There’s a Catch

South Korea is globally known for its K-pop, beauty products, and advanced technology. Beyond its cultural influence, the country also has a distinctive property market that has been attracting increasing international attention. In this article, we’ll explore some of the key characteristics that make South Korea’s real estate landscape unique.

Foreign ownership of real estate in South Korea used to be quite flexible, with no minimum purchase amount and limited restrictions on foreign buyers. As a result, the South Korean property market saw a spike in foreign buyer transactions, which prompted the government to introduce the ‘foreign land transaction permit system’ in August 2025.

This new policy aims to control speculative foreign capital inflows and stabilise housing prices. It covers residential properties the capital Seoul, as well as portions of neighbouring Gyeonggi Province, and seven districts in the port city of Incheon.

The regulations include:

• Foreign buyers must report their property purchase within 60 days of signing the contract.
• Buyers must move into the property within four months and stay there for at least two years.
• A financing plan and disclosure of the source of funds are required if the purchase is funded from non-domestic sources.

In short, the residential properties in central Seoul, the adjacent metro ring, and many nearby urban neighbourhoods are now mostly off-limits for foreigners.

That doesn’t mean you’re blocked from buying property in any of these areas. If you intend to buy a city apartment in Seoul, Gyeonggi, or Incheon as an investment asset, there are some regulations you need to keep in mind.

Foreigners can still freely buy residential property in non-restricted zones, but expect to face more bureaucracy when making any property purchase. Examples include permit applications, proof of legitimate funds, plans to live there, and how you’ll support yourself.

Jeonse, Korea’s unique rental system that shapes its entire housing market

Jeonse is a unique leasing concept not found in many property markets: instead of tenants paying monthly rent, they surrender a large, interest-free deposit (In Seoul its typically 50% to 80% of the property price). The tenant pays little or no monthly rent; at the end of the lease (usually two years), the landlord returns the full deposit.

For tenants, Jeonse is attractive because it eliminates monthly cashflow strain and helps build good credit with banks.

How does this benefit landlords? Well, their job is to manage that big deposit for a paycheck: invest it, refinance against it, or use it to service the mortgage. Jeonse is a significant, short-term source of capital that can be tax optimised. This changes how investors and property owners derive gains from their assets. Instead of relying on many small monthly rent payments, you receive a lump sum that can be used to:

• Pay down or fully cover mortgage payments
• Finance renovation plans and improvements
• Invest in other assets to generate returns

The bulk-payment nature can also turn property ownership cashflow-neutral (or even profitable) in a way that monthly rentals often achieve.

But the system also introduces capital concentration and liquidity risk. If macroeconomic conditions shift and tenants can’t, or won’t, put down large deposits, you might be forced to find other sources of funding or reduce the price of the lump-sum Jeonse payment.

Likewise, when you need to return a Jeonse deposit early, for example, when a tenant ends a rental contract, landlords must have liquidity available.

Here’s a quick run of the numbers:

At a glance, the rental upside is below average compared to the average rental yield in Singapore. But remember that while you’re making money off that lump-sum Jeonse deposit, property values also tend to appreciate at the same time.

Property value inflation in South Korea moves much more quickly compared to capital growth in Singapore, and the difference is striking.

Residential properties in Seoul have seen rapid city-wide growth. Last year, the average increase was about 8.7%, and some prime districts like Gangnam, Seocho, and Yongsan have recorded double-digit growth of between 12 – 20.9% in recent years. Meanwhile, satellite and secondary cities generally record modest capital growth of a few per cent each year.

In contrast, Singapore’s property market, while more stable, rarely offers such extreme swings; growth is steady but tempered by strict regulations, limited land supply, and the remaining lease on HDB developments.

Aside from asset appreciation, there are also key advantages in tax optimisation for landlords who utilise the Jeonse system instead of a traditional rental model.

In a traditional rental model, landlords pay income tax on gross rental income – 14% to 38% for Koreans, depending on total income, and generally a flat 20% for foreigners, subject to applicable double taxation treaties.

In a Jeonse model, there is no regular income tax because landlords receive a lump-sum deposit instead of monthly rent. Tax only applies if the deposit earns interest or is reinvested. If landlords invest the deposit overseas, returns are taxed under the rules of the investment country. Singapore’s double taxation treaty with South Korea offers greater flexibility than earning monthly rental income in Korea, which is taxed immediately.

Where do tenants actually practice Jeonse in South Korea?

Jeonse remains a common rental approach in Seoul. In prime and mid-tier Seoul districts, Jeonse rental contracts have historically accounted for 40–60% of total leasing activity each year, with most transactions leaning towards family-sized apartments.

Jeonse is also widely used in satellite cities. However, suburbs tend to feature lower deposit ratios (30–60%), and banjeonse (partial deposit + small monthly rent) are more common.

The housing markets there are characterised by commuters and families seeking space and proximity to school zones, and South Korean families use this as a tool for housing stability and to lock in homes close to schools.

In secondary cities, Jeonse exists but is less dominant. Deposits are generally smaller as property prices are lower, and a larger share of tenants prefer traditional rental contracts with monthly payments, especially among young single professionals and students. In these secondary cities, Jeonse is still sometimes utilised to rent family-sized apartments in good districts, but it’s not the default for the entire market.

What patterns do we spot in all of these areas? That’s right: Family-sized housing.

Proceeding with a nuanced view

Since Jeonse demand typically revolves around family-sized homes in good neighbourhoods, Singapore-based investors who are used to the city-state’s broad categories like CCR or OCR need to analyse the Seoul property market through a much finer lens, where the street you buy on can matter more than the city itself.

In South Korea, the residential market is hyper-local, hyper-segmented, and heavily influenced by proximity to school districts, transportation nodes, and whether a building is located in a redevelopment zone.

If you’re evaluating an investment through the lens of residency or rental demand, there are a few fundamentals to consider:

1. Focus on family-sized apartments, not studios.

Unlike Singapore’s rental market, where studios and one-bedders are usually an affordable investment option, South Korea’s high-value rental market means that demand pools around larger-sized units of more than 900 sq ft.

These types of units are sought-after by Jeonse tenants because they largely comprise couples and families who want more living space, proximity to school catchments, and long-term housing stability. Smaller units skew toward monthly rentals and prices, and leases tend to fluctuate relatively more dramatically with economic cycles.

2. Prioritise locations tied to school clusters and major subway lines.

South Korean families typically choose homes based on hagwons (tuition clusters) and elite school catchments. This means certain zones in Seoul (Gangnam, Seocho, parts of Songpa) and major satellite cities (Bundang, Ilsan, Suwon) see more resilient Jeonse demand and higher deposit ratios.

Proximity to convenient subway lines (Line 2, 3, 9, Shinbundang, GTX corridors) also drives up rental housing demand.

3. Stick to branded apartments with a strong reputation.

The development of South Korean apartments is dominated by major branded complexes such as Raemian (Samsung), Hillstate (Hyundai), Xi (GS), and Lotte Castle. These aren’t “luxury labels” per se, but most locals use them as benchmark indicators of reliable maintenance, strong resident committees, redevelopment potential, and developer-backed stability.

As a result, tenants pay a premium to live in complexes built by trusted developers, and Jeonse liquidity is significantly stronger for units there.

4. Understand how redevelopment zones skew long-term value.

Many older South Korean apartments gain value because they sit within designated redevelopment or reconstruction zones. While this can significantly boost future capital appreciation, it may also complicate foreign ownership and increase leasing risk, such as shorter leases near demolition periods.

If you buy into a redevelopment zone without understanding its timeline, the property can become illiquid and non-income-producing for several years.

5. Make sure you can return Jeonse deposits.

The biggest risk for any Jeonse landlord is the deposit return. You must ensure your liquidity plan is robust. Many foreign investors use the deposit to pay down loans, but if the market turns and a tenant vacates early, you’re legally obliged to refund the deposit immediately. If you can’t return it, you’re in trouble. A conservative cash buffer is non-negotiable.

That said, Jeonse is shrinking in dominance

Before we over-romanticise Jeonse as a concept, it is important to note that its dominance in South Korea’s rental market has been gradually declining in recent years. Rising interest rates, tighter lending conditions, and heightened awareness of landlord default risks have made both tenants and landlords more cautious.

A growing issue in the Jeonse rental market is the delayed or incomplete return of deposits, driven largely by housing price pressure and liquidity mismatches.

Younger tenants increasingly prefer monthly rent with smaller deposits, while some landlords, especially those reliant on leverage, struggle to safely deploy large lump-sum deposits. This results in a gradual shift of prevailing rental practices, particularly in newer developments and satellite cities.

A pinch of patience for a different flavour

With real estate registrations, tax filings, and tenancy agreements often requiring Korean-language documentation and occasionally in-person involvement, you’ll need to be fluent or be comfortable hiring a bilingual agent to handle paperwork for you, so factor in added time and cost.

While the South Korean property system may feel intimidating at first, the payoff can be surprisingly rewarding. Jeonse properties offer a level of financial predictability that many Singaporean landlords can only dream of.

Just imagine: No chasing tenants for payments, no juggling late fees, and no constant reminders. You receive a lump-sum deposit at the start of the lease, and your income is your responsibility.

If invested wisely, these large deposits can be earning interest, funding property upgrades to make units more rental-friendly, or even supporting your next property investment.

The best part? If you buy in the right area, there is a stronger chance of your property benefiting from the strong uptick in property appreciation, and you might be able to exit the market quicker than the time it took you to enter it. Keep in mind that capital gain taxes still apply.

Conclusion

South Korea’s property market offers Singaporean-based investors a unique approach to owning overseas real estate without the ongoing burden of monthly rental collection, while benefiting from meaningful cash arbitrage.

The process requires patience, research, and careful execution, but for long-term investors, the rewards are clear: a quality asset, stable tenant arrangements, and a large lump sum of capital to deploy before returning it at the end of the lease.

In a world where cash flow and flexibility matter more than ever, South Korea’s Jeonse system may be a compelling addition to your property strategy.