The recent downturn in the global real estate market has revealed a significant risk that overseas real estate funds sold by domestic banks could incur large losses.
According to financial sources on December 18, the sales balance of overseas real estate funds of South Korea’s top five banks (Kookmin, Shinhan, Hana, Woori, and Nonghyup) totaled 742.7 billion won (approximately $570 million). . . It was revealed that 106.1 billion won and 151 billion won of this amount will mature in the first and second half of next year, respectively.
Banks have expressed concern about potential losses from the fund. The increase in remote work following the COVID-19 pandemic has increased commercial real estate vacancies, and the reduced demand for real estate investment due to high interest rates has reduced the value of these assets. A spokesperson for a commercial bank expressed concern that “funds that target returns in the range of 6-7 percent at the time of investment may record negative yields.”
Losses can be even greater if funds sold through other channels, such as through brokerages, are taken into account. According to the Korea Financial Investment Association, the total amount of overseas real estate funds set up by domestic financial companies was 76.97 trillion won as of December 14, an increase of 5.46 trillion won from 71.51 trillion won a year ago. Trillion won.