Chinese investors who had shown voracious appetite for land and properties on South Korea’s southernmost resort island of Jeju have recently started to back away from the Jeju property market after tightened regulations on investment immigration and escalating diplomatic tensions between Korea and China over the Korean government’s decision to deploy the U.S. Terminal High Altitude Area Defense (THAAD) system.

According to the Ministry of Land, Infrastructure and Transport on Friday, total area of land owned by foreigners in Jeju reached 20.37 million square meters as of the end of June, which is 220,000 square meters less compared to the end of December last year. It is the first time that foreigners’ land ownership in Jeju has dropped since the government started compiling related data in 2002.

The decrease in overall real estate ownership by foreigners in Jeju is largely attributed to the exit of Chinese investors from the property market. Land ministry data showed that total land area owned by Chinese nationals shrank to 8.53 million square meters as of the end of June from 8.88 million square meters six months ago. It is a stark contrast from the previous trend that Chinese land ownership of Jeju Island had steadily increased since 2011 when it stood at 1.24 million square meters. Data showed that Chinese investors have disposed 350,000 square meters of land in Jeju in the January-June period of this year – or 3.9 percent of their total holdings.

Chinese investment in the Jeju property market started to skyrocket in 2011 when the Jeju self-governing province introduced a real-estate investment immigration program that grants foreigners who invest 500 million won or more in Jeju permanent residency. As of the end of June, 41.9 percent of foreign land ownership of Jeju Island is held by Chinese investors.

However, Chinese nationals have become shy about investing in Jeju land after Jeju Special Self-Governing Province earlier this year announced stricter rules on investment immigration that restrict areas foreigners would be able to invest for investment immigration to tourist zones or facilities amid growing concerns over unsustainable development from the increasing number of real estate owned by foreigners and limited ripple effect of investment immigration on the overall regional economy.

Industry observers also noted that Beijing’s disapproval of Seoul’s decision to deploy the America’s defense missile system, THAAD, on the Korean soil has soured investor sentiment among Chinese in Korea’s real estate market.

By Chung Soon-woo and Lee Yoon-sik

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