In 2015, South Korea was the fourth largest overseas investor in US properties. Some of the major investments by South Korean buyers have included Manhattan sky scrapers and the Westin St. Francis Hotel in San Francisco, California. This large level of new investment is indicative of both the current South Korean domestic market and the perception abroad about the state of the American real estate market.
Due to the stability of real estate mezzanine debt, the rapidly growing numbers of retired South Koreans are starting to funnel their retirement savings into real estate. Many are turning to the American market because the Korean domestic market is competitive, crowded, and opportunities are more limited. The increase in the number of elderly people, combined with a trend of pooling pensions in order to make larger investments, means more people are looking for a stable market with better return rates than stocks or bonds and the US real estate market represents that. Diversifying assets that are currently accessible to South Korean investors is also proving to be a motivating factor.
Korean investors are just one group from East Asia to see opportunity in US real estate in recent years. New York City has also seen large real estate investment coming from China, as has Boston, Massachusetts. New Chinese investments have also gone into Florida, as the state works to draw investment as a luxury destination with beaches, a thriving nightlife, and high end shopping experiences while also offering a more affordable entry point than other American cities like San Francisco or New York. Japanese investors have also acquired US real estate because of its stability and good return rate.
Korean investment into the US takes many other forms, including auto manufacturing facilities, industrial investment, and tourism, to name a few. As of 2012, there was a total of $24.5 billion worth of Korean direct investment in the US. Around 1.45 million Koreans visited the US in 2014, up 80% over 2007 levels, contributing over $7.7 billion to the US economy through both tourism and education expenses.
Lian Eytinge is research intern at the East-West Center in Washington and a student at the University of Southern California.