Property Accounts for Over 75% of Households' Net Assets
The Bank of Korea announced on June 22 that the total net asset of South Korean households and nonprofit organizations was approximately 8,726 trillion won as of the end of 2018 with housing assets and non-housing real estate assets accounting for 50.5 percent and 25.7 percent of the total, respectively. On the other hand, the ratio of net financial assets stood at 22.2 percent.
According to the central bank, the non-debt financial assets include 32.8 percent in deposit, 32.7 percent in insurance, 18.8 percent in securities and about 3 percent in fund. In other words, the financial assets showed a strong tendency of risk aversion.
South Korean households’ asset portfolio is very different from those of households in advanced economies. For instance, financial assets have accounted for 60 percent to 70 percent of American households’ assets since as early as the 1950s. The current ratio is about 60 percent in Japan, too. In that country, real estate bubbles burst in the early 1990s and then many young people began to shift their assets to financial markets.
“South Korean households’ lopsided asset distribution is very vulnerable to a sudden impact such as falling real estate prices,” said an investment banking source, adding, “The government needs to review taxation systems and so on so that assets can be shifted to non-real estate markets such as the stock market.”