Survival strategy for Generation MZ amid the real estate bubble
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Kang, an office worker in his twenties, recently became part owner of a commercial building in Seoul’s Gangnam district worth 10 billion won ($ 8.47 million) with a capital of only 5,000. won.
âEarlier in December of last year, I participated in a joint investment project led by a local FinTech firm to purchase a building called Yeoksam London Vill, a newly constructed eight-story commercial property in Gangnam. I invested 5,000 won and received 38 won in dividends in July, acquiring a share of the property. The annual rate of return is 3.14%, âsaid Kang, who only wanted to be known by his last name.
Kang is among a growing number of those in the so-called âMZ Generation,â referring to people born from the 1980s to the 2010s, who turned to condominiums, even with a very small amount of money.
According to Kasa Korea, a local fintech firm that operates the Kasa real estate investment mobile app, a total of 2,694 individual investors like Kang participated in its latest public offering process – between September 8 and September 16 – for a 21 storey commercial building. located in Yeoksam-dong, south of Seoul. They raised a total of 8.4 billion won.
People in their 20s and 30s made up almost 60% of investors, followed by those 40 and over (26%), 50 and over (12%) and 60 and over (3%), said the society.
Launched in September last year, the Kasa mobile platform uses blockchain technology to issue digital asset-backed securities – priced at 5,000 won per unit – for the property of a given building purchased by Kasa Korea. . The company shares the rental income from the building with its investors in the form of dividends, every three months.
Designated as one of the âInnovative Financial Servicesâ by the Financial Services Policy-Making Commission in 2019, the service aims to lower the threshold for retail investors in the profitable commercial real estate market.
The upward trend of co-investing for fractional ownership is gaining popularity, especially among the country’s younger generation, frustrated by sky-high real estate prices.
âI once read an article saying that an ordinary employee can buy a house in Seoul while saving all of their income without spending a dime for over 10 years,â said an investor named Lee who participated. to the investment projects of Kasa Korea.
âIn an overheated real estate market, it’s almost impossible to buy a property with my earned income. So I resorted to real estate co-ownership as an alternative investment option, even though the rate of return isn’t that high, âsaid the 31-year-old.
Group buying of real estate has also become an international phenomenon. In the United States, the number of people with different last names who bought homes together increased 771% from 2014 to 2021, according to data from real estate analytics firm Attom Data Solutions.
âThe prolonged low interest rate environment has triggered the bursting of a bubble in the real estate market around the world. The more house prices rise, the greater the demand for home ownership among millennials. Tired of paying rent, the younger generations will continue to seek co-investment opportunities to meet their demand for homeownership, âsaid Ahn Dong-hyun, professor of economics at Seoul National University.
Building apartments together
Some investors pool their money to buy land on which to build an apartment complex.
Known as the âlocal housing association for an apartment project,â a group of people living in the same town or neighborhood, without housing, collectively collects a large amount of money needed to buy plots of land. land – which is subject to approval by their local district office. – and to cover the cost of the construction of apartment buildings.
A 35-year-old Seoul office worker surnamed Kim recently applied to become a member of the local Sadang-dong Housing Association, Dongjak-gu, which plans to build an apartment complex near Isu Station, comprising 961 apartments.
âEven though the approval process usually takes several years, I think it’s worth a try as I can’t buy my own home right now anyway, given the chaotic real estate market conditions,â said Kim said.
Despite the deployment of dozens of government policies aimed at curbing out of control house prices over the past four years, the average price of an apartment in Seoul doubled to 1.21 billion won in October from 607 million won. in May 2017, when the current government took office, according to data from KB Kookmin bank.
In addition, the median house price across the country jumped 11.98% in the January-September period, the biggest increase in 15 years.
Sharing of living space
The country’s overheated housing market has also placed a financial burden on people living in rental homes.
Faced with soaring housing prices, some young housing seekers have turned to share house living, a type of rental accommodation in which people share certain common spaces such as kitchens or bathrooms, while having a private room. Shared homes offer lower monthly deposits and fees than other rental apartments.
Kim Joo-hye, a 28-year-old office worker, who lived in an officetel, or studio, in Gwacheon, Gyeonggi Province, recently moved into a shared apartment near her workplace in Yeouido, mainly to save on housing expenses.
âI live with a roommate, who has also been an office worker in Yeouido, for almost two years. We sleep in separate bedrooms, but share the kitchen, bathroom and living room. I had to pay nearly 700,000 won in monthly rent when I lived in an officetel, but now it’s around 400,000 won, âshe said.
âYoung office workers like me, who have just started a career, face the heavy burden of paying rent and other housing costs like maintenance costs. Cohabitation alleviates such pressure as roommates share the financial responsibility. “
Shared housing is also a popular off-campus alternative for students, who struggle to cope with rent increases and expensive tuition fees.
âThe average monthly rent for a two-bedroom apartment in Yongin, Gyeonggi Province is over 400,000 won. Of course, it’s cheaper than the monthly rent in Seoul, which was a heavy financial burden for me. So, in March, I moved into a shared flat near the university. Since the place is equipped with beds, basic household appliances and basic necessities, I can reduce not only the rent but also the living expenses, âsaid a 23-year-old student who only wanted be known as Jung.
Experts say the trend of coliving is likely to accelerate as house prices continue to rise with the increasing number of one-person households.
The share of single-member households in South Korea topped 40 percent of the total in October, according to the Home and Security Ministry, continuing an upward trend of 39.7 percent in June, 39.5 percent in March and 39.2 percent at the end of last year. year.
“Under increasing inflationary pressure, financially insecure younger generations, especially one-person households, cannot help but strive to reduce housing costs by seeking other housing options such as shared accommodation.” said Kim Kyung-min, professor of urban computing. at Seoul National University Graduate School of Environmental Studies.
By Choi Jae-hee ([email protected])
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