[Opinion] Overseas Real Estate

Dubai reminds us of “Dubai oil.” Some 80 percent of oil bound for Korea is imported from the Middle East, and Dubai oil stands for oil produced in the Middle East. Dubai, one out of seven emirates comprising The United Arab Emirates, is located in the Middle East, but is different from the other emirates, in that it has a lot of luxurious shopping centers and also sells alcohol. “Burj Al Arab,” the only seven-star hotel in the world built on an artificial island, is also an attraction in Dubai.

It is remarkable that Koreans have great interest in investing in real estate in Dubai. On the first day of the briefing session for investment into a mixed-use condominium development, which is being constructed by a Korean construction company, the rate of contract reached 85 percent. As a result, the construction company is considering to sell the other units as well in Korea, which were initially assigned to the local market of Dubai. However, most of the buyers do not have the intention to live in Dubai. They put their money down on the condominium just for an investment.

Koreans’ interest in overseas real estate is getting heated. The rich in Gangnam area of Seoul started real estate investment in the U.S. and Canada quite long ago, and are recently expanding their investment target markets to Australia, Singapore, China, Hong Kong, Macao, Japan, Dubai, New Zealand, and Kazakhstan. So are even middle-income people. Some real estate consultancies hold briefing sessions for investment clubs of high-income self-employed people, including doctors and lawyers. Real estate consultants say, “After North Korea announced the nuclear test, we can notice higher interest in overseas real estate, maybe because of uneasiness,” says real estate consultants. The domestic real estate market, however, keeps stagnant. At the bottom of it, the “Roh administration factor” should be held accountable.

During the first half of this year, a total of 29 trillion won domestic capital flowed out overseas, up around 60 percent from last year. It was mainly for stock investments, but the amount just for carrying out assets exceeded one trillion won, following expenditures for tour and study abroad. We may have to be concerned more about domestic funds flowing out than inviting foreign funds. For the first time, first half of this year saw direct overseas investment by Koreans top foreign direct investment in Korea. Only 30 percent out of those who finished studying abroad for master or doctoral degrees in science and engineering field comes back to Korea. However, it is difficult to see a politician who thinks about the reason behind the domestic funds flowing out and the talented not coming back.

Huh Seung-ho, Editorial Writer, tigera@donga.com