South Korea's real estate FDI climbs 7.3% in Q2

South Korea's outbound direct investment in real estate continued to grow in the second quarter, up 7.3% year on year, despite sharp falls in the country's foreign direct investment in the manufacturing and financial sectors since the start of this year.

Korea's FDI in real estate totaled $1.6 billion during the April to June period of this year, said the Ministry of Economy and Finance on Sept. 18. In the first quarter, the country's FDI in the sector posted 23.9% year-on-year growth to $2.0 billion.

In contrast, offshore direct investment in both the manufacturing and financial sectors drastically fell 62.7% and 21.3%, respectively, during the second quarter compared to the previous year. In the first quarter, both sectors saw over 40% year-on-year declines in outbound FDI.

"Offshore investments in real estate continued to increase due to diversified revenue channels backed by low interest rates and low growth,” the ministry said. Also, Korea's toughened real estate regulations may have prompted investors to seek fresh opportunities in overseas real estate markets.

Outbound direct investment in real estate has been climbing since the start of 2018. It is the third largest sector for South Korea's FDI after the financial and manufacturing sectors.

Korea's total outbound direct investments were $12.1 billion during the second quarter, down 27.8% from the same period last year. Net investment was $7.61 billion, down 46% from last year's second quarter, due to the impact of the global pandemic.

By country, Cayman Islands accounted for $2.4 billion, followed by $2.1 billion in the US; $1.4 billion in Singapore; and $600 million in the UAE.

Asia was the most popular destination for South Korean investors, making up 30.1% of the total FDI investments. Central and South America accounted for 23.9%, along with North America and Europe with 20.6% and 16%, respectively.

By Eun-seo Koo

koo@hankyung.com