Korean Real Estate Investors Eye Dubai

Y (38), who works for the Dubai branch of K trading company in the United Arab Emirates, said, “I think many times a day that life is kaleidoscopic.” That is because Korean middle-aged women are flocking to Dubai to play golf and hunt for real estate to invest in, which reminds him of “Bokbuin” (which means Korean housewives who speculated in real estate) in the Gangnam area of Seoul in the 1980s.

Korean bokbuins are scrambling to Dubai in Persian Gulf, which is sucking in global capital with practical economic reform. It is being analyzed that after the real estate policy of August 31, dispirited real estate investors in the country are turning their eyes to Dubai.

According to the Ministry of Finance and Economy on April 24, 35 cases in which Koreans bought real estate in Arab Emirates including Dubai for the purpose of investment have been reported to the ministry. The expenses totaled $79 million (approximate 75 billion won). A ministry official said that the investors were all companies or corporations, and there has been no reported case in which an individual bought property.

But, a real estate agent in Dubai said, “An individual’s purchase of overseas real estate is done mostly through local corporations or resident officials. Since late last year, I have received 10 inquiries on average a day, especially from Korean middle-aged women.”

Actually, B construction company, which has built a multiplex building and plans to sell it in lots in September, received dozens of inquiry calls on April 24.

In Dubai, there is no additional tax if 2% of the price agreed on is paid as a reporting commission in case of purchasing real estate.

Real estates Koreans are mainly interested in include houses with three rooms worth 600-700 million won. Profits from leasing such houses amount to 36 million won annually. House prices in Dubai are surging by 30% every year and accordingly, more than double profit margins can be expected within three to four years, explained a local real estate agent.

A travel agency has recently introduced a package product consisting of a Dubai tour, a golf tour and a real estate investment consultation in collaboration with a local real estate agency. The number to be accepted for its first tour starting on May 19 is 15, and 10 of them have already made a reservation.

Many people are concerned about this type of overseas investment. As the construction business in Dubai gets overheated, the number of jerrybuilt buildings is increasing, and cheap finishing materials are often being used. Experts point out that one should keep in mind that if oil prices drop and accordingly, “oil money” which is currently propping up Dubai real estate market, dries up, the real estate market could cool rapidly.

Jae-Myoung Lee egija@donga.com