‘Korean real estate market highly attractive for investors’

Korea’s real estate market is still caught in a protracted stagnancy, but in fact, the country’s properties are highly attractive targets for overseas investors, according to a global real estate expert.

“Low vacancy rates and high demand, that is how you objectively judge a real estate market,” Jeremy Helsby, CEO of global real estate services provider Savills, said in an interview with The Korea Herald.

“Based on this principle, Korea, especially the central business district in Seoul, is a phenomenally strong market.”

Savills, Britain’s largest real estate company, which was established in 1855, opened business in Seoul in 2008 through the merger of a Korean-foreign joint real estate company and a local asset management firm.

Its portfolio ranges from investment advisory, property leasing and management, to general business consultancy.

“Not only does Korea provide an investment-friendly environment, but it also holds close ties with significant counterparts such as the United States,” Helsby said.

It is true that major foreign investors ― mostly from the United States, Singapore, China and Japan ― are faced with tough competition, the CEO admitted.

One of the most conspicuous characteristics of the Korean market is the dominance of conglomerate-affiliated players.

“Overseas business units, regardless of their size or capacity, usually are no match to local rivals in terms of market information,” he said.

The global real estate company thus suggests that foreign investors strategically avoid highly competitive items and turn their focus to other sectors, such as value-added funds or buildings yet under construction.

“Real estate investment in Korea has so far been largely focused on operational commercial buildings only,” he said.

A representative example is the Seoul Finance Center, which is currently owned by the Government of Singapore Investment Corporation, or GIC.

“These highly sought-after properties, however, are limited and the Korea real estate market will eventually have to diversify,” Helsby said.

Korea would be one of the top three spots for investment in the Asia-Pacific region, but its real estate market is yet in the process of maturing, he added.

Along the way, Korean investors, too, will grow active in investing in overseas real estate, he claimed.

“There is an increasing level of capital being raised here in Korea and that money is to be invested somewhere,” said the CEO.

Even with the prolonged aftereffect of the 2008 global financial crisis, commercial real estate turned out to be a relatively sound investment, with the general yield remaining above the 4 percent level, he said.

For this reason, private life insurance companies, as well as state-run organizations such as the Korea National Pension Service, have been boosting their investment in well-located buildings in the U.S. or European region.

“The European market, especially the inland area, is still struggling while the Asian capital is growing by the year and seeking new investment,” Helsby said.

“This is where the supply and demands graphs cross each other and this is why Korean real estate investors have chances of growing further in the upcoming future.”

By Bae Hyun-jung (tellme@heraldcorp.com)