15 Asian Legal Business | January-February 2025 to oversupply,” points out Park. Rising construction costs may also lead to decreased future supply. The hotel sector, on a more positive note, is experiencing a remarkable recovery, driven by increasing international tourism. “This resurgence occurred without the contribution of Chinese tourists,” says Park. The potential return of Chinese visitors suggests further growth potential, attracting investor interest in hotel acquisitions and investments. Moreover, new types of properties, such as data centres, senior housing, and co-living spaces, continue to demonstrate strong growth potential, adding diversity to traditional real estate investments. These emerging sectors are attracting both domestic and international investors looking for fresh opportunities. Compliance is key As Korea’s property market becomes more international, following regulations correctly has become crucial. Foreign investors are particularly focused on conducting thorough property checks and compliance with all relevant rules. For instance, foreign investors are advocating for stricter adherence to applicable laws and regulations, including ABAC, AML, and sanction laws. “This heightened focus reflects a broader demand for transparency and accountability, ensuring that investment is safeguarded against legal and regulatory risks,” says Park. In light of foreign investment regulations, Park believes Korea’s foreign exchange filing regime has been perceived as less favourable to foreign investors compared to some jurisdictions, with significant discretionary power held by the relevant authorities. This discretion can create uncertainty in cross-border transactions, highlighting the need for clearer guidelines and more predictable outcomes. Adds Kang: “The legal framework must strike a delicate balance between ensuring regulatory compliance and fostering sound investment opportunities,” he says. To keep pace with international standards, Korean legal service providers also need to evolve their service offerings to include international perspectives and become familiar with global transaction tools such as warranty and indemnity (W&I) insurance. Real estate “W&I insurance was traditionally overlooked by local investors in real estate transactions due to various factors, including the well-established court property registry,” explains Park. “However, foreign investors have introduced W&I insurance into the Korean market, and we anticipate a rise in its utilisation in local real estate transactions moving forward, especially in cases where foreign investors are involved.” Moreover, environmental considerations have also moved to the forefront of property dealings, as demonstrated by the emergence of ESG-centred real estate development, adds Kang. This represents a significant shift from past practices. “Historically, parties often addressed environmental concerns solely through representations and warranties,” explains Park. However, buyers and sellers are now choosing to do more thorough environmental inspections before completing the deal. This practice could help protect both parties from potential environmental problems that might come up after the selling company has been dissolved. “This approach includes the establishment of specific remedy mechanisms and the consideration of separate insurance policies to mitigate risks associated with environmental issues,” says Park. As the Korean property market is clearly becoming more sophisticated and internationally oriented, it is creating new demands for law firms and other professional service providers. Park notes that in the past, lawyers were often asked by their clients to keep property inspections and legal checks simple and limited. But now, for investors, the increasing internationalisation of Korea’s real estate market means enhanced need for crossborder expertise, adaptation to global best practices, integration of ESG considerations, and understanding of international transaction standards. Looking ahead, the Korean real estate market appears set for continued growth and internationalisation. Park cautions that local investors need strong legal support when dealing with international counterparts, as cultural and procedural differences can complicate negotiations. Success in this evolving market requires an understanding of both Korean and international property practices. “Urban regeneration projects in aging metropolitan areas have gained substantial momentum, creating increased demand for legal expertise in property rights and permit requirements.” — Kang Dongwon, Kang & Partners
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