By Jane Han
Staff Reporter
Korea is minting new dollar millionaires at the fourth-fastest pace in the world, with a significant number of the ultra-rich allocating the highest percent of their holdings to real estate, according to a study released Tuesday. This annual statistics lack a sense of reality as it doesn't reflect the ongoing economic crisis but still is a good reference to Koreans' wealth accumulation patterns.
The Asia-Pacific Wealth Report, compiled by U.S. investment bank Merrill Lynch and consultant Capgemini, estimated that there were 118,000 high net-worth individuals (HNWIs) in the country at the end of 2007, almost 19 percent more than in the previous 12 months. This is much faster than the global growth rate of 6 percent.
HNWIs are defined as those with net assets of at least $1 million, excluding primary residences and consumables.
Much of the growth is mainly owing to the country's economic growth and active financial markets, but particularly the booming real estate market in 2007, as Koreans held property accounting for 40 percent of their total wealth, nearly triple the global average of 14 percent.
``Buoyant economic conditions in Korea last year helped create a growing class of HNWIs,'' said Chang Jae-ho, domestic marketing director at Merrill Lynch Global Wealth Management.
However, this type of portfolio management is expected to hurt them this year, as properties in the red-hot speculative ``Bubble Seven'' districts in southern Seoul have lost nearly 20 percent so far this year.
Aside from realty investments, the strong performance of the equity market also contributed to the growth in the country's HNWI population, which accounts for 4 percent of the ultra-rich population in the Asia-Pacific region.
The benchmark KOSPI index gained an impressive 32 percent in 2007, giving solid returns to investors. But stock market returns will be tough even on the wealthy this year as the Seoul bourse has already slid almost 30 percent.
With the U.S. economic slowdown rippling out to the Asia markets, a significant number of today's dollar millionaires will turn from equities and towards fixed-income securities that offer less volatile returns, the report said in its 2009 outlook.
Meanwhile, leading the world in millionaire growth last year were India, which saw a 23 percent increase in its HNWI population, followed by China and Korea. The Asia Pacific region is home to 27.8 percent of the world's wealthiest, according to the report.
This year's results were announced in the 9th World Knowledge Forum hosted by the Maeil Business Newspaper.