Wealthy Koreans' Outlook: Negative on Real Economy, Positive on Real Estate

Hana Financial Management Research Institute Survey of 393 PB Clients
Average Assets of 16 Billion KRW, Annual Income of 477 Million KRW
First Reduction in Real Estate Proportion of Total Assets in 6 Years Since 2013

[Asia Economy Reporter Kim Min-young] Although wealthy individuals in South Korea anticipate a sluggish real economy this year, they have a positive outlook on the real estate market. However, unlike previous years, they slightly reduced the proportion of real estate in their portfolios.

Additionally, wealthy individuals generally secured their seed money to become rich primarily through business income (32.3%). They reported acquiring this seed money at around the age of 41.

These findings were revealed in the "Korea Wealth Report" released on the 2nd by Hana Financial Management Research Institute under Hana Bank. The report analyzed survey data from 393 Hana Bank private banking (PB) clients holding financial assets of 1 billion KRW or more. Their average total assets amounted to 16 billion KRW, and their average annual income reached 477 million KRW. However, this survey was conducted over about one month starting from mid-December last year, before the outbreak of COVID-19 in South Korea.

Wealthy individuals differentiated between economic outlook and real estate. Regarding the real economy over the next five years, 54.7% responded negatively, while only 8.7% were positive. In contrast, 27.8% had a positive outlook on the real estate market. Negative outlooks accounted for 34.7%, which is 10.6 percentage points lower than the 45.3% negative outlook in the 2018 survey.

However, due to real estate regulations, the proportion of real estate assets among wealthy individuals decreased. The ratio of real estate assets to total assets was identified as 51% last year, down 2 percentage points from 53% in 2018. This is the first time in six years since 2013 that the proportion of real estate assets among wealthy individuals has declined.

The research institute analyzed that "the causes can be found in the slowdown of real estate price increases due to strengthened real estate regulations, sales of houses by multi-homeowners, and gifts for tax savings."

Among the real estate assets of wealthy individuals, commercial real estate accounted for the highest proportion at 48%. This was followed by residential homes for living purposes (30%), residential homes for investment purposes (14%), and land (8%).

Younger wealthy individuals had a relatively higher proportion of residential homes for investment purposes, while older wealthy individuals had a higher proportion of commercial real estate. By asset size, the proportion of commercial real estate sharply increased among high-net-worth individuals. In particular, among those with total assets of 10 billion KRW or more, the proportion of residential homes for investment purposes was only 13%, whereas commercial real estate accounted for 55%.

Researcher An Seong-hak of Hana Financial Management Research Institute explained, "The typical pattern of real estate holdings among wealthy individuals by age and asset size is to accumulate wealth through various routes such as residential homes for investment purposes, then increase the proportion of commercial real estate for retirement preparation."

The financial asset portfolio of wealthy individuals was composed mostly of cash deposits at 40.6%, followed by funds and trusts at 27.6%, stocks at 15.9%, others at 11.1%, and bonds at 4.7%.

Meanwhile, domestic wealthy individuals secured their seed money to become rich at an average age of 41. The top method for securing seed money was business income at 32.3%, followed by inheritance and gifts (25.4%), earned income (18.7%), and real estate investment (18.2%). The primary method for accumulating additional wealth after becoming wealthy was also business income (31.5%), followed by real estate investment (25.3%), which differed from the seed money acquisition methods. The average age at which wealthy individuals gift assets to their children was 65.2 years, and the average age of the children receiving the gifts was 34.9 years.

This content was produced with the assistance of AI translation services.