'Superrich' ditch real estate for cash in 2022: report

Real estate properties remain preferred investment for ‘wealthy’ Koreans

50,000 won notes (123rf)

The wealthiest in Korea tended to increase their shares of safe haven assets, such as cash holdings and deposits, rather than taking a risk with real estate in 2022, according to a report published Sunday by a think tank under Hana Bank.

According to the 2023 Korean Wealth Report compiled by the Hana Institute of Finance, the wealthiest members of society owned an average of 18.7 billion won ($14.2 million) in cash holdings and deposits, accounting for an average of 58 percent of total assets, more than double the 25 percent from 2021.

“The rate of cash holdings went up in preparation for economic uncertainties," the report read, adding “The preference for deposits went up amid base rate hikes last year.”

The report was based on a survey of 2,013 Koreans above the age of 19 conducted in December last year.

Of the respondents, 745 were defined as "wealthy," meaning that they have financial assets over 1 billion won per household. Among the 745 respondents, those with financial assets over 10 billion won or personal assets over 30 billion won per household were categorized as "superrich."

In 2022, those classed as superrich owned an average of 32.3 billion won in total assets.

They owned an average of 15.6 billion won worth of real estate assets, marking a 5 billion won drop from the year before. Instead, the average financial assets owned by superrich individuals went up from 15 billion won to 16.1 billion won over the same period.

On the other hand, with the slowdown of the stock market, the superrich owned fewer stocks than before, with 520 million won worth of stocks in 2022, marking a sharp drop from 1.68 billion won the year before.

The superrich earned an average of 1.2 billion won a year. Of the earnings, 39 percent came from property income, followed by business income and then labor income.

They spent an average of 400 million won per year, excluding savings and loan payments. They spent the most on travel (24 percent), followed by education and then attire.

The report also looked into the lives of wealthy Koreans with financial assets over 1 billion won. The wealthy respondents had an average of 7.2 billion won in total assets in 2022.

Despite the slowdown in the housing market, real estate is still an attractive investment outlet for wealthy Koreans, the report showed.

While 84 percent of the wealthy respondents predicted that the real estate market will worsen this year, 32 percent still chose real estate as the best investment option.

Additionally, 37 percent said the real estate market will rebound in 2025. Another 26 percent and 24 percent respectively projected the rebound to happen in the second-half of 2024 and the first-half of 2024.

Among the wealthy, 36 percent said stability was the advantage of real estate investments. For the other 32 percent, high profitability was the appeal.

"In every crisis from the financial crisis (in 1997) to the COVID-19 pandemic, there were opportunities for gaining wealth. Those who seized the chance became the 'nouveau riche' or superrich," Hwang Sun-kyung, senior researcher at the Hana Institute of Finance said.

By Im Eun-byel(silverstar@heraldcorp.com)