Korea's household wealth skewed to property, undermining capital markets: report

SEOUL, December 08 (AJP) - South Korean household wealth remains heavily concentrated in real estate, leaving the country structurally behind major advanced economies in financial investment and capital-market participation, according to a report released Monday by the Korea Economic Research Institute (KERI).

The study, authored by Professor Song Heon-jae of the University of Seoul, found that non-financial assets — largely residential and commercial property — accounted for 64.5 percent of household wealth in 2024.

By comparison, real assets represented 32 percent of household wealth in the United States, 36.4 percent in Japan and 51.6 percent in the United Kingdom.

Financial assets made up just 35.5 percent of Korean household wealth, the lowest among the countries surveyed.

The report also highlighted Korea’s conservative asset allocation within its financial portfolio. Cash and deposits rose to 46.3 percent of financial assets in 2024 from 43.4 percent in 2020, while holdings of securities and derivatives edged down from 25.1 percent to 24.0 percent, underscoring a household preference for savings over market-based investment.

In contrast, US households have steadily shifted toward capital markets, with financial assets accounting for 68 percent of total household wealth. The share of investment products climbed from 51.4 percent in 2020 to 56.1 percent in 2024, supported by strong equity and asset-price performance.

Japan maintained a high cash and deposit ratio of 50.9 percent, but expanded its allocation to financial investments from 15.2 percent to 20.9 percent, aided by a weaker yen and government-backed initiatives to deepen retail participation in capital markets.

“The excessive concentration of household wealth in real estate constrains the efficient flow of capital into productive sectors such as corporate investment,” said Lee Sang-ho, head of KERI’s Economic and Industrial Policy Bureau. “Building a culture of long-term financial investment is essential to creating a virtuous cycle between corporate growth and household wealth.”

The report called for structural tax reforms to rebalance Korean household portfolios, including simplifying dividend and capital gains taxation and introducing a unified tax rate for financial income.

It also recommended reviving tax-deductible long-term investment funds and allowing tax relief on losses from long-term financial products, mirroring practices in the United States.

* This article, published by Aju Business Daily, was translated by AI and edited by AJP.

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