Among domestic financial companies’ investments in the overseas real estate market, 2.49 trillion wo..

Among domestic financial companies’ investments in the overseas real estate market, 2.49 trillion won was found to be feared to be insolvent in the first quarter of this year. As a result, investors’ caution in related products is required, the financial authorities said.

The Financial Supervisory Service said on the 23rd that 7.57% of overseas real estate operations (32.9 trillion won) invested by domestic financial companies had caused the loss of due profits. Loss of due profit means that a financial company has the right to immediately recover its loans due to delinquency of debtors and damage to collateral at overseas real estate investments.

The total balance of overseas real estate investment, including business investment, was 55.5 trillion won. By industry, the insurance industry invested 30.3 trillion won (54.6 percent), the largest amount.

It was followed by banks worth 12.1 trillion won (21.9%) and securities worth 7.5 trillion won (13.6%). In terms of regions, North America was followed by 34.4 trillion won (62.1%), Europe 10.3 trillion won (18.5%), and Asia 3.7 trillion won (6.7%).

Concerns about insolvency were mainly focused on the office sector, where the vacancy rate is expanding. Although the quarterly loss of profits is decreasing to 2.64 trillion won in the third quarter of 2024 and 2.59 trillion won in the fourth quarter of 2024, the authorities believe that the possibility of insolvency in the office sector is still emerging.

The Financial Supervisory Service pointed out, “The office sector is still delayed due to weak structural demand such as changes in work patterns and high vacancy rates, so there is a possibility of expanding losses in the future.” As of the first quarter, the vacancy rate for overseas real estate was 20.4% for offices, 7% for industrial facilities, 6.3% for apartments, and 10.4% for retail.

However, the Financial Supervisory Service added, “The scale of (overseas real estate) is not large and the loss absorption capacity is sufficient, so it is unlikely to be transferred to system risk.” The financial sector’s investment in overseas real estate accounts for 0.8% of its total assets (7392.7 trillion won).