Global property investment in a global city, Seoul: dynamics of office and housing markets

© 2012 Dr. Hyung Min KimGlobal property investors operate within internationalised property markets and shape the development of global cities. Despite national sensitivity, foreign property ownership has been widely accepted in the world. Faced with the pressure of global integration, regulations on foreign property ownership have been removed in various countries. Accordingly, massive flows of capital into real property have appeared in selected developed countries. At the moment, cross-border capital flows into real estate account for approximately forty per cent of the total commercial property transactions in the world. Despite its increasing volume of properties owned by foreign capital, little research has investigated the magnitude, rationale and impacts of Global Property Investment (GPI) in cities. By concentrating research attention on the impact of GPI in a global city, it will be possible to identify spatially differentiated outcomes expressed via its magnitude and its location choice. Hence, the following research question can be raised with respect to a global city: what has been the trend in magnitude of its GPI; how has that been expressed in spatial terms; and what are the impacts of inflows of GPI? Significant human and capital flows associated with the decision of international property investors will result in locally intensive impacts. Understanding these impacts will allow advice to refine and enhance sectoral and urban policy. Accordingly, this study examines GPI effects that explain the magnitude, location choice and impacts of GPI on the office and housing markets using Seoul as case study. Analyses of data collected from secondary sources and interviews reveal that global investors have contributed to an increase in magnitude of transaction volumes of property and created new institutional arrangements. Also, GPI contributed to increases in property prices and resulted in the expansion of property markets. Locations of foreign property investment have been highly concentrated. The most active areas for global office investment were well established business districts in high-priced office property due to foreign investors’ attitude to risk-aversion. This capital accumulation was reflected in new office construction. Concentrated spatial patterns have also appeared in the housing market. Especially overseas Koreans, represented as the transnational class, have chosen high-priced areas due to the desire for capital gains. Also, ethnic communities and long-term settlements of foreign nationals have attracted foreign housing investment. High spatial concentration of GPI has, therefore, encouraged the emergence of global CBDs and global villages in Seoul