South Korea Investigates Real Estate Purchases by Children Under 8 Amidst Broader Crackdown
Seoul, South Korea – In a stunning case that’s sending ripples through the South Korean property market, authorities are investigating how two siblings, both under the age of eight, managed to acquire 25 apartments, townhouses, and multi-family homes in the Gyeongnam province for a total of 1.6755 billion won (approximately $1.25 million USD). The Ministry of Land, Infrastructure and Transport flagged the transactions as potentially illegal donations and has requested a police investigation into suspected ‘jeonse’ fraud – a unique Korean deposit system – while also notifying the National Tax Service.
The Case of the Young Property Moguls
The children’s father reportedly signed the contracts on their behalf without disclosing the gift of funds, immediately raising red flags. Adding to the complexity, three lease registration orders have already been issued for the purchased properties, intensifying concerns about potential exploitation of the ‘jeonse’ system. ‘Jeonse’ is a large lump-sum deposit paid by tenants instead of monthly rent, and the system is vulnerable to fraud when landlords misuse these funds.
This case isn’t isolated. It’s part of a larger investigation announced by the Ministry of Land, Infrastructure and Transport, revealing 1,002 suspected illegal real estate transactions detected during a planning investigation in the second half of this year. The investigation targeted abnormal activity across Seoul, Gyeonggi Province, and other key regions.
A Widespread Crackdown on Abnormal Transactions
The Ministry’s investigation focused on three key areas: unusual housing transactions in Seoul and Gyeonggi (May-June), rapidly rising property prices (March-August), and overall unusual trends (January-July). The scope of the investigation expanded beyond Seoul to include areas like Gwacheon, Bundang, Sujeong, Suji, Dongan, and Hwaseong – all areas experiencing price rebounds and the potential for a “balloon effect” – where inflated prices could quickly deflate.
Beyond the case of the young buyers, investigators uncovered other suspicious activities. These include excessive, interest-free loans from family members – such as a 10.6 billion won loan from a father for a 13 billion won apartment purchase – and the misuse of loan funds, like borrowing for corporate working capital instead of property acquisition. One example involved a 1.75 billion won apartment purchase funded by 700 million won borrowed for business expenses.
Price Manipulation and Market Disruption
The investigation also revealed instances of price manipulation. An executive director of a corporation reportedly inflated the reported sale price of an apartment to 1.65 billion won, held it for nine months, canceled the transaction, and then sold it to a third party for 1.8 billion won. This practice artificially inflates market values and distorts genuine transaction data.
The Ministry is also paying close attention to the purchase of multiple homes by minors and the sale of new apartments at suspiciously low prices, extending its scrutiny to cities like Incheon, Busan, and Daejeon. These areas are being monitored due to their increasing housing prices, transaction volumes, and the prevalence of potentially fraudulent listings.
Tightening Regulations and Future Enforcement
This crackdown comes on the heels of new government measures implemented on June 27, September 7, and October 15, including stricter loan regulations and expanded regulated areas. The Ministry plans to extend its investigation to areas like Guri and Namyangju, where the “balloon effect” is a growing concern. Furthermore, they are improving the reporting process for canceled real estate transactions, requiring more specific categorization of cancellation reasons – such as “lack of buyer’s funds” – to enhance transparency.
Kim Gyu-cheol, head of the Housing and Land Office at the Ministry of Land, Infrastructure and Transport, emphasized the government’s commitment to tackling speculative and illegal activity. “We will respond strictly to speculative and illegal transactions through planning and investigation of abnormal real estate transactions,” he stated, “and we will create a market environment where actual consumers can transact with confidence.”
The unfolding investigations highlight the South Korean government’s determination to stabilize its property market and protect genuine homebuyers. As the Ministry continues its scrutiny, the focus will remain on identifying and addressing illicit practices that undermine market integrity and affordability. For those considering investing in South Korean real estate, due diligence and transparency are now more critical than ever. Stay tuned to archyde.com for further updates on this developing story and expert analysis on navigating the evolving landscape of the South Korean property market.
