Developers and realtors in pockets of Southern California are channeling a new stream of South Korean investment money to stave off the slump that’s hit much of the U.S. housing market. Lenora Chu has the story.
Doug Krizner: The South Korean government has recently made a big increase in the amount of money its citizens can invest in foreign real estate. Here in Southern California, there’s hope South Korean money might boost the housing market. Lenora Chu reports.
Lenora Chu: From the pool deck of a new condo building in downtown LA, developer Ki Ryu points to Koreatown with quick jabs of his index finger. It’s just a hop away, he’s quick to tell potential Korean buyers.
Ki Ryu: The $5 dollar distance. If you get a cab, if it’s within $5 dollars range, that’s kind of the range that Korean people usually hang out.
Ryu is advertising condos at 1100 Wilshire in Korean language media here. The idea is that Koreans spread the word back home.
The strategy is working. Now standing inside a model condo, Ryu says nearly 40 percent of the buyers so far have Korean surnames.
Ryu: Asian people like to have their own assets here, and we saw the great potential from Korean community and we try to tap into that demand.
That demand for American property is only expected to grow, even as the U.S. housing market drops.
Why? Several months ago the South Korean government increased the limit on foreign investment from $1 million to $3 million per head. Meanwhile, the South Korean currency has appreciated dramatically.
That means U.S. properties sell for a third less than they used to. LA broker Edward Koo:
Edward Koo: So if they sell the condo in Seoul downtown, they can buy the condo in Beverly Hills, at least two or three.
Last year, South Koreans invested a billion dollars in global real estate, according to the National Association of Realtors. That’s a 30-fold increase over 2005. This year, they expect the outflow to top $1.5 billion.
Fifty percent of that will land in America, in places like Orange County and Koreatown. That is, assuming Koreatown traffic doesn’t scare the buyers off first.
In Los Angeles, I’m Lenora Chu for Marketplace.