More and more Koreans are parking their money in real estate overseas as the domestic economy wallows in the doldrums.
According to the Bank of Korea on Sunday, individual Koreans and businesses spent US$445.1 million on properties abroad last year, up a whopping 47 percent from the year before and 3.8 times from five years ago.
The government lifted all restrictions on buying overseas real estate in 2008 as long as the purchase is declared and the purpose stated.
The U.S. remained the most popular destination for real estate investment with $255.2 million despite economic uncertainties there. But in second place was booming Vietnam with $56.1 million, followed by Canada with $16.9 million, Thailand with $15.5 million, and Japan with $15.8 million.
Property in major cities in the U.S., Japan and most advanced countries is considered a stable source of rental revenues. Typical purchases include small apartments in New York costing in the low W1 billion range and commercial properties for W3 billion to W10 billion. For cash buyers, the estimated rate of return is four to five percent compared to interest on savings of around one percent.
In Japan, which will host the 2020 Summer Olympics, real estate prices are rising, while Prime Minister Shinzo Abe's economic policies have resulted in ultra-low interest rates, prompting many investors to turn to real estate.
Vietnam, Malaysia and other Southeast Asian countries are popular due to strong return possibilities. Foreigners have been allowed to buy homes in Vietnam since 2015, and many Koreans are buying condominiums there for around W300 million.
Park Sang-wook at Woori Bank said, "As the Vietnamese economy grows at breakneck speed, home prices are expected to soar, and many people are purchasing several apartments there expecting profits 10 years from now."
But such investment also carries risks, chiefly from insufficient information available at a distance. It is crucial to find a trustworthy agent and check tax details and exchange rate trends. "Korean investors are interested in condos in Vietnam, but a lot of them are being built, and this raises the chance of oversupply and falling prices," one realtor said.
Yoon Chang-sun at KeyWest Global Investments said, "The global real estate market is being impacted by the U.S.-China trade dispute and rising interest rates. But since the domestic economy is expected to be hit harder by the slowdown than advanced countries, demand is expected to continue."