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More Japanese home builders entering Korean market

Posted August. 30, 2011 07:08,   


A humble brown two-story house with a solar panel stood out among many showy homes with a white or blue roof in a residential area in the Dogbane district of Yongin, Gyeonggi Province. Entering the house, the Japaneseque design was evident with not only a small pond and tatami room but also vacuum window and floor that block noise and energy loss.

The house, which looks like any other concrete house, is a model home of Misawa Home, a Japanese detached-house brand that built a wooden house at its factory in Japan and relocated it to Korea. The model home has had as many as 200 visitors a day since opening, showing high interest in “made-in-Japan” houses among many Korean consumers.

Japanese companies and investors targeting the Korean real estate market are getting more aggressive. Japanese house builders have made inroads into the Korean detached-house market, while Japanese funds are big buyers in the Korean real estate market by purchasing Korean properties.

The Korean Land, Transport, and Maritime Affairs Ministry said Japanese showed a "devouring appetite” for the Korean real estate market as they bought in this year`s second quarter alone what they purchased for all of 2009. Korean government statistics confirmed for the first time the rumor that real estate purchases by Japanese have dramatically increased since the March 11 earthquake.

○ Japanese builders enter Korean housing market

In the past, Japanese house builders in Korea relied on word-of-mouth marketing. Today, they use aggressive sales strategies by setting up model homes and signing exclusive contracts with Korean sales partners.

Misawa Homes, Japan’s top wooden house builder, is owned by Toyota Group, its largest shareholder. Misawa established a model home in Dongbaek in mid-August in announcing that it would enter the Korean market, and signed an exclusive sales contract with Miko House, a sales company to supervise sales in Korea.

Tanigawa Construction, a Japanese builder of wooden houses, formed the company Tanigawa Korea at the end of last year and began its business in Pangyo, a new city in Seongnam, Gyeonggi Province.

Sekisui Heim, a subsidiary of Japan`s Sekisui Chemical, which is famous for steel-framed houses, will open a model home in Yongin`s Dongcheon neighborhood Sept. 1 to start its foray into the Korean market. The company`s Korean partner is Esheim, a Korean builder specializing in detached houses since 2009.

Sumitomo Forestry, a builder of detached houses, set up a joint venture with Korea’s top wood materials seller Dongwha Holdings to create Nature House, a brand for detached houses, and builds houses in Pangyo and Dongbaek.

Japanese companies apparently find the Korean detached-house market as a new source of revenue that can replace the Japanese real estate market amid Japan`s extended business sluggishness.

Lee Chung-heon, the division head of Miko House, said, “Korea has an increasing demand for high-end detached houses but has no builder with 50 years of know-how about detached houses.”

Esheim President Kim Jun-beom said, “As for detached houses, Japanese builders are more competitive.”

○ Japanese buying land in Korea

Japanese funds are flowing into the Korean real estate market. The Korean Land Ministry said Monday that foreigners purchased 2.68 million square meters and sold 1.44 million square meters, a net increase of 1.24 million square meters or 0.5 percent, in the second quarter.

Japanese, including ethnic Koreans from Japan, had net purchase of 203,000 square meters excluding sales from purchases to become the second-largest investor in the Korean real estate market following American investors (733,000 square meters) in the same period.

Japanese investment in the Korean property market in the second quarter was three times the size of its investment (60,000 square meters) in the second quarter of 2008, when Lehman Brothers collapsed, and about the same as it purchased for all of 2009 (205,000 square meters). From 2008 to this year`s second quarter, European and Chinese investors exceeded Japan in investment in Korean properties.

“Many rumors were milling around that Japanese funds flowed into the Korean real estate market in the wake of the earthquake in Japan,” said Kim Seung-bae, the president of “Fides Development,” a real estate development consulting company. “This situation has been confirmed by government statistics."

Moon Seong-yo, a manager at the real estate industry division of the Korean Land Ministry, said, "The inflow of Japanese funds is increasing mainly on Jeju Island,” adding, “We are paying attention to whether Japanese investment in the Korean real estate market will become a trend.”

imsoo@donga.com realist@donga.com