Jeju, a picturesque island in South Korea, has attracted many Chinese realty firms and property investors not just because of its natural beauty and proximity to China, but also for its simple immigration rules and business-friendly policies. Things are likely to change, however.
Its newly elected governor, Won Hee-ryong, plans to review all foreign-funded projects approved by the previous provincial administration, including residential developments and leisure facilities, Chosun Ilbo reported. Won wants to screen out “speculative capital” amid the island’s booming housing and tourism sectors.
It is widely believed that Won’s remarks are directed at Chinese developers and immigrants, and as such, foreign firms in the province are bracing themselves for a sudden policy reversal.
There are more than a dozen Chinese firms on the island, including major state-owned enterprises like Greenland Group as well as several small- and medium-sized private realty firms.
Soaring land prices, purchase restrictions and tepid demand in China’s own property market have pushed many developers and investors overseas. Jeju is a natural choice for them.
Besides a few mature markets like Britain, Australia and the United States, Chinese investors prefer neighboring countries that are just two to three hours by air. South Korea and Malaysia are two favorites. Recently, however, enthusiasm for Malaysian homes appears to have ebbed following the disappearance of Malaysia Airlines Flight MH370; Jeju has gained the upper hand.
The South Korean island’s simplified immigration policy — visa-free entry for Chinese passport holders — is an added incentive. And more importantly, the prospects of enjoying unrestricted right of abode in Jeju or even becoming a naturalized citizen by owning a property there also appeal to many cash-rich investors.
But the new Jeju leadership is about to change all that.
The National Business Daily reports that a theme park project featuring the island’s myths and legends in the city of Seogwipo was called off shortly before construction was to start, after the key investor Landing International (00582.HK) spent three years on the project. A joint high-rise residential development by Greenland and multinational conglomerate Lotte is also said to be affected.
There’s also bad news for Chinese immigrants.
Media reports say the new governor wants to follow the precedent set by Canadian immigration authorities who have put up more barriers to curb the surge of Chinese immigrants. On top of the minimum 500 million won (US$489,870) investment in properties, applicants are now required to invest the equivalent capital in bonds issued by the provincial government to fund social welfare initiatives and infrastructure enhancement.
Also, it is said that there will be a cap on the total number of immigrants to the island — no more than 1 percent of the total population. That means the quota will peak at 6,000 per year, and that will in turn affect the sales of residential projects on the island.
Some observers warned about policy uncertainties when Chinese developers jumped on the “go global” bandwagon almost two years ago, but few took heed. Jeju is just one more reminder of the risks involved in investing overseas. It certainly won’t be the last.
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