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ABC KID
Joined: 14 Sep 2007
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 Posted: Tue Aug 17, 2010 4:58 pm Post subject: Are Apartments Good Investments? |
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I have never bought an apartment in Korea and I doubt I ever will but I am still very curious...
I see reports of apartment prices heading down in Seoul at the moment but generally do prices increase much nationwide and are the increases slow, steady or rapid? Does it depend on the area?
I have read about a certain poster on here who made a significant profit on an apartment in Busan but is his case the exception or the norm? I have heard of apartments decreasing in value considerably in a very short space of time.
Are there any apartment owners here? Do you anticipate cashing in and counting your vast profits later? Or are they just added security instead of having to move house every couple of years? |
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pkang0202
Joined: 09 Mar 2007
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| Posted: Tue Aug 17, 2010 5:42 pm Post subject: |
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Not good investments.
If you got 4-5억원 to buy an apartment, I suggest you just get one on Jeonse and invest the rest of the money in a diversified portfolio of mutual funds, hedge fudge, ETFs, commodities, and alternative investments. |
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bobbyhanlon
Joined: 09 Nov 2003
Location: 서울
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| Posted: Tue Aug 17, 2010 6:13 pm Post subject: |
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| far too expensive relative to people's income, especially in 'hot' areas that are driven by speculation (first gangnam, then places like bundang, and now the new wave of 'new cities' like songdo). the population isn't increasing like it used to and there is a lot of construction going on. the economy is doing very well in a top line sense but underneath that, ordinary people are tightening their belts, and household debt is too high. i can't see any reason why property should be a good investment here in the near future. |
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red_devil
Joined: 30 Jun 2008
Location: Korea
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| Posted: Tue Aug 17, 2010 6:44 pm Post subject: |
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| Property could be a good investment if you're willing to pay for it. In hot areas the market is always good and apartments are in high demand especially in the high rise buildings. Even on Wolsae you can get a sizeable deposit of 20-30M KRW on top of the monthly rent you get. With record numbers of people migrating to Seoul, demand will inevitably outweigh supply. |
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ABC KID
Joined: 14 Sep 2007
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| Posted: Tue Aug 17, 2010 7:01 pm Post subject: |
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Interesting replies so far...
Please can some people also give answers that are not related to Seoul... This country has more than one city and its surrounding area you know!
For instance, apartments can be bought for 1-2 억원 in many parts of Chungcheongbuk-do... |
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jvalmer
Joined: 06 Jun 2003
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| Posted: Tue Aug 17, 2010 7:03 pm Post subject: |
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| Some smaller sized cities have great deals for apartment where 1억원 would be on the high side. |
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itaewonguy
Joined: 25 Mar 2003
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| Posted: Tue Aug 17, 2010 7:34 pm Post subject: |
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I guess it all depends on luck!
if you are going to buy an apartment its a good idea to get into the lottery to be one of the first allowed buyers in a new town! this means you get to sell the house at the premium when the prices go up.. of course location is key!
there are also good investments to be had in areas which you can predict will be demolished eventually and a new town will go in.. you can buy an old villa in that area, sit on it and wait for the new development!
but Korea is facing a shortage of people in the near future.. so they become to ambitious to quickly and over build! still korea has so many old run down areas so those tenants would be happy to move into a new apartment complex if the price is right and the location suits them..
so because seoul is such a dirty and old area. I guess the next option for construction companies and the government is to start to refurbish seoul. but the problem is SPECULATION is such a rampant thing here than any development in Seoul will start a chain reaction of speculation which will drive the prices up to the roof and make it not worth buying!
you see the government doesn't prevent this.. president ROH tried to.. be the corrupted officals who own the construction companies, banks and money leading companies didn't like that, so... yeah...
so who knows.. its a lottery.. try and think where the next bundang will be, or the next Kangnam will be! and you will be made! |
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big_fella1
Joined: 08 Dec 2005
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| Posted: Tue Aug 17, 2010 7:56 pm Post subject: |
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Banks will only lend 50% of the properties value as a mortgage.
That should tell you all you need to know about the investment grade of Korean apartments.
Yes some people have made big money, but people have also made big money in Las Vegas. |
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oFz0u
Joined: 29 Jan 2010
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| Posted: Tue Aug 17, 2010 8:12 pm Post subject: |
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| Be careful buying property right now. Prices may fall soon. Or maybe not. Or maybe they will. |
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pkang0202
Joined: 09 Mar 2007
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| Posted: Tue Aug 17, 2010 10:42 pm Post subject: |
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| pkang0202 wrote: |
Not good investments.
If you got 4-5억원 to buy an apartment, I suggest you just get one on Jeonse and invest the rest of the money in a diversified portfolio of mutual funds, hedge fudge, ETFs, commodities, and alternative investments. |
I guarantee that a well diversified portfolio will yield better, SAFER, returns than putting all your eggs in the Korean Real Estate. |
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Changwon Charlie
Joined: 22 Aug 2009
Location: Changwon
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| Posted: Wed Aug 18, 2010 12:19 am Post subject: |
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| jvalmer wrote: |
| Some smaller sized cities have great deals for apartment where 1억원 would be on the high side. |
That would be a terrible apartment then.
I have bought and sold 4 apartments in my time in Korea (about 15 years) all in smaller cities of 1 million people or below (Masan, Gwangju, Andong and now Changwon) and the best apartment you could get for 1억 in a city of this size would be the very old style 14 pyeong jugong 5-story apartments that are about to fall down and are 25 plus years old.
The average price for a 25 -30 pyeong apartment in Changwon seems to be around 2.5-3억. this sin't a new apartment or a big one, just a standard one. New ones here are going from 4억 for a 30 pyeong.
My wife's family lives in the countryside up near Andong at Cheongsong which doesn't have many apartments at all and is very rural and their 25 pyeong apartment sells for 1.8억.
As you can see, real estate, even in rural Korea is bloody expensive if you want to live in an apartment.
and in answer to the original question.
| Quote: |
| I guarantee that a well diversified portfolio will yield better, SAFER, returns than putting all your eggs in the Korean Real Estate. |
Fantastic answer. There was a good period from about 2000-2005 when there was a lot of speculation but most people have bought apartments they expected to sell-on for a profit which they now cannot and also cannot sell.
This means they have zero money to buy already up to their eyeballs in debt. Excepting the high-end (10억 plus) which always will sell well (and I am pretty sure none of us here can afford) forget about real estate in Korea for the next 5 years. |
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schwa
Joined: 18 Jan 2003
Location: Yap
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| Posted: Wed Aug 18, 2010 1:42 am Post subject: |
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The thing is, most apartment buildings here are just left to deteriorate over 20 or 30 years & then get torn down. In & out at the right time you might get your investment back but hard to see much upsale potential -- everyone wants to move into the new complex down the block.
Koreans on the east coast here tell me land is the way to go. I'm sure thats somewhat dicy too. |
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Changwon Charlie
Joined: 22 Aug 2009
Location: Changwon
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| Posted: Wed Aug 18, 2010 2:52 am Post subject: |
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| schwa wrote: |
| Koreans on the east coast here tell me land is the way to go. I'm sure thats somewhat dicy too. |
Lots of it is because of speculation though and lucking out.
People try to buy land where they think new developments are going to go up or to grow food for profit in their older age.
This constant speculation, coupled with the fact there isn't that much flat land keeps it crazily high.
I will ask my wife later because she is always having a sticky beak about that kind of thing but the amount put me right off. |
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PatrickGHBusan
Joined: 24 Jun 2008
Location: Busan (1997-2008) Canada 2008 -
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| Posted: Wed Aug 18, 2010 3:31 am Post subject: |
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In the right area and if you have the necessary funds an appartment can be a great investment.
We bought and sold an appartement in Busan and we made a sizeable profit. We had researched areas beforehand and bought in a developing neighborhood.
We are actually thinking of buying an appartment for cash in Busan in the next few years so we have a place to stay at when we visit.
Another factor to consider is how long you intend to stay. Buying an appartment is smart for a long-term resident but not so great for someone staying only a couple of years. |
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Changwon Charlie
Joined: 22 Aug 2009
Location: Changwon
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| Posted: Wed Aug 18, 2010 3:47 am Post subject: |
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| Quote: |
| We bought and sold an appartement in Busan and we made a sizeable profit. We had researched areas beforehand and bought in a developing neighborhood. |
I can assure you this wasn't done post-2007 though. Times have changed dramatically on the real estate front here. I made good money on real estate as well during the 10 year period before 2006 but those days are long gone.
A good indication of this is that the Jeonsae % compared to the value of the apartment has gone up considerably over the last 2 or 3 years from about 30% to 50% of the value of buying the apartment.
This is for 2 reasons:
1. People that would have been buyers are now directing their money elsewhere, primarily at the moment funds. This is turn leads to;
2. because the owners of residences can't sell but still need to make money they have increased the jeonsae to try to get value to invest to make the same money they could have before. Also because people are not willing to buy but still want to live in comparable places the market can bear it.
| Quote: |
| Buying an appartment is smart for a long-term resident but not so great for someone staying only a couple of years. |
I agree, having somewhere to call your own certainly adds to your feeling of security anywhere. However, you can't consider the house you live in a primary investment as it is actually costing money to live there compared to having a secondary house and renting it out. I know that is said in a round about way but I hope you get the jist of it. It is hard to express exactly what i mean.
This is where people make big mistakes in investing as they consider the place where they live an investment. Basically a house is a house, not an investment you are hoping to make a lot of money off quickly.
Last edited by Changwon Charlie on Wed Aug 18, 2010 3:53 am; edited 1 time in total |
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