Monday, June 16th, 2014
SEOUL, KOREA - Foreign investors who have waited and seen the movements in the domestic real estate market for six years since the 2008 global financial crisis are finally increasing their holdings focusing mostly on Seoul's commercial buildings. Analysts said this is largely because of the foreign investors' perception that the properties in Seoul are lower in investment risks than those of emerging markets such as China's.
According to real estate industry sources on June 13, the total amount invested by foreigners for those assets in excess of 100 billion won has reached 1 trillion won this year to date. The volume was 1,127 billion won last year, up more than three times from 2012 when the figure was only 350 billion won. Given the amount was 507 billion won for the first six months of last year, this is an increase of 100 percent.
The unit price paid for each building is also rising. Early this year, American private equity firm Kohlberg Kravis Roberts & Co. acquired K Twin Towers in Seoul's downtown jointly with LIM Advisors, an Asian-based multi-strategy investment group, at the cost of 500 billion won. This is the largest deal in three years among the properties purchased by foreign investors.
In April this year, the State Oil Fund of Azerbaijan (SOFAZ) bought Pine Avenue Tower A in Seoul at 477 billion won. It was the first time for both KKR & Co. and SOFAZ to buy into Korean building properties.
The main reason foreign investors are increasing their holdings in Korean commercial properties has to do with the fact that there is a widespread perception that Korea is a market where a stable stream of rental income can be had.