Rich Koreans' Real Estate Holdings Dwindle

The proportion of real estate holdings among the assets of wealthy Koreans has declined for the first time in six years.

Many rich people appear to have sold their real estate holdings or, more to the point, signed them over to their children after tougher restrictions on multiple-home ownership.

Hana Bank surveyed 393 private-banking clients in December of last year and found that they owned an average of W1 billion worth of financial assets, with total assets averaging W16 billion and annual salary W477 million (US$1=W1,218). Their average age was 68.

Real estate accounted for 50.9 percent of their total assets, a slight drop after it had continuously risen from 44 percent in 2013 to 53 percent in 2018.

Rich clients preferred commercial real estate (48 percent) to residential property (30 percent). The richer and older they are, the more commercial real estate they own. Among those with assets of more than W10 billion, the proportion of commercial real estate reached 55 percent.

But tougher real-estate ownership curbs announced on Dec. 16 will likely increase comprehensive real estate taxes that rich people have to pay this year by some 48 percent. Still, some 51.3 percent said they intended to hold on to their real estate, while 29.7 percent said they will decide after monitoring the situation further. Only 9.1 percent said they had already sold off real estate or plan to do so.

Younger people tended to be more willing to buy real estate than older ones. 

Ahn Sung-hak at Hana Bank said, "There may be a slight change in the real estate investment strategies of the wealthy following the coronavirus epidemic, but the answers were given looking five years ahead so we won't see any major changes."

How did they come up with the seed money? The survey showed 32.3 percent earning the money from their own businesses, and 18.7 percent from wage earnings. But 25.4 percent said they inherited it and 18.2 percent earned it from investment in real estate.

Respondents got their hands on the seed money at the average age of 41 and gave their assets to their children when they were 65.2 years of age. The average age of their children was 34.9 at the time the assets were given to them.

Meanwhile, only 43.6 percent of respondents who run their own businesses said they want to pass them on to their children, while 40 percent said they will definitely not. The rest were undecided.