Korean Job Discussion Forums

[btsmrtfan]

I am contemplating relocating to South Korea and would appreciate comments regarding the outlook for the future of the South Korean economy what with the Hanjin Shipping bankruptcy, Samsung Note 7 recall and the North Koreans increasingly detonating nuclear devices?

[coralreefer_1]

In the long run, it might be ok. Lots like to gripe about the economy but the numbers dont lie over the past few generations.

With that said, crap is about to hit the fan in the next few years. I dont mean batteries or hanjin, but rather the volatile situation here in the area not only with N. Korea, but with chinese and ongoing disputes with nearly all of its neighbors....japan beginning to regrow the pair of balls it lost 50 years ago, elections coming up, a growing consensus by the public and government that family run chaebols need to and eventually will be split up...etc etc.

I wouldnt call it " bleak"...but many indicators are pointing to a serious gut check. I've been here 12 years now and usually one to give a pass to current events when others say the sky is falling...but seriously im in the process of liquidating and moving out my assets and cash.

Note that doesnt mean a warning not to come. For a short stint or otherwise no real/heavy investment in the economy...there is little to fear.

[chopstick]

Coral Reefer: would all those factors make buying a house in Korea a bad idea? I always here the bubble is going to burst but where we are it seems not to.

[coralreefer_1]

[tophatcat]

[PRagic]

OP, relocating permanently? Or for a predetermined stint?

Samsung has a lot of sway on the Korean market, so with the Galaxy fiasco, there has been a sell off. This has had a weakening impact on the won.

Just prior, however, Korea had it's status upgraded, and that contributed to a market push and a corresponding strengthening of the won. That, plus Korea isn't as exposed to Brexit as companies from neighboring Japan, and the Fed got cold feet.

Look for the won to weaken further when (ok, if) the Fed bumps up rates in December. Before then? Depending on appetite for risk, the market could improve and the won could strengthen short term. Timing could be key, though, as we're looking at at least two more quarters to realize the Galaxy recall impact on Samsung's bottom line. Institutional investors could just as easily decide to load up when Samsung stock is at a discount. I know I'm thinking about it lol.

The business with the meatball up north has little to no impact on the Korean market. It's factored in, and, in fact, part of the reason for Korea's soverign rating bump was a lack of perceived impact. Larger in geographic scope, the S. China sea business could send ripples through markets, but, frankly, I think the presidential election in the US will have a bigger impact.

Real estate? Wouldn't touch it. If you're in Seoul, though, and if you're gonig to be here very long term with a family, you're damned if you do and damned if you don't. While other urban centers will most likely see a decline given supply and demand forces (over building and lousy demographics), Seoul is usually comparatively stable.

Having said this, there was a creeping loss in Seoul real estate values for nearly six years running. But it was quiet. People sat on their properties. You could literally see agents folding left and right. Count on the Korean government, though, to try and controll everything, especially because SO much wealth, and therefore so many votes, are connected to property here. Equities are a crap shoot, so money goes into property.

I say damned if you do and damned if you don't for a couple of reasons. First, if you're not buying, you're renting, and rents are at all time highs and may even move up before any bubble pops. The frontload chunsae system has all but dried up for anything of decent size in decent areas. You defintely don't get much for your money.

Now, IF you want to buy, and you're not looking to drop, say, half a million minimum to a million or more (US denero) on an apartment, then you're probably looking at villas. These may run 200-400, but they'll be in a decent area and crappy, or they'll be off the beaten path and OK. But then the resale will be a factor, and don't be looking to make any coin off of the transaction in that case. Korea's buy apartments because they're more centrally located and because they're easier to rent and/or flip down the road.

If you're going to be here long term, and if you don't have debt or other obligations that necessitate sending money 'back home' (wherever that may be), then you'll simply be living on the economy and you can worry about the exchange rate as you go. When the won is weak, leave it here. When it's strong (under 1,100/USD as of late), exchange and send some back. You'll be in the same boat as everyone else here, most pissed off about the price of produce, milk, meat, etc.

[PRagic]

Apologies, but I should add that those prices are indicative of 3 bedroom apartments. You can get 1 and 2 bedroom shoe boxes for less, of course. All boils down to personal needs and preferences.

coralreefer_1 gave some spot on advice IMHO.

[btsmrtfan]

Thanks for all the helpful info. Lots and lots to think about and I may be asking some specific questions after I give everything some more thought.

[Lazio]

[PRagic]

In a sense you're right given the fact that chunsae can now amount to as much as 70-90% of a property's value. But there would have to be a monster tank in the real estate market, and you'd have to be unfortunate enough to have rented from someone who is overextended.

Back when the Asian financial crisis hit in mid 2007, things tanked. By 2008, tenants were demanding up to 10, sometimes 20 percent of their chunsae be refunded. If your landlord was liquid, you'd get some money back. We did. If not, you were stuck in your unit until the market settled down, rates returned to about the same as pre-crisis levels, and someone new was looking to move in (thereby paying your chunsae back).

If you're on chunsae, you're not paying taxes and you're not paying upkeep, and you're not subject to longer term depreciation in property values. It's a personal decision. Personally, we've never wanted to be on the hook for a domitstile here. We bought land about 18 years ago, but that's about it. Our investments are mostly in the US.

[PRagic]

oops...1997, not 2007!

[Lazio]

Right, personal preferences.

For us jeonse was a stepping stone. It was nice not to pay monthly rent.

When we bought our current place we had the option to rent it jeonse as well. We weighed both options and went with buying. It worked real well for us so far.

Mortgage rates are slightly lower compared to jeonse loan rates so that's already a few bucks per month. Tax is not that much, somewhere between 200-300k/year. If we lived in jeonse and moved every two years or even every 4 years, that would cost a lot more with the realtor's fee and the movers etc. None spent so far on upkeep. If you buy a newish place, you normally don't need to worry about it for short to mid term.

And most importantly the value of the place has been increasing steadily since we bought it. And it's a villa not even an apartment. So if we went with jeonse back than, we would need to fork over more money to the landlord every 2 years instead of watching our assets grow without any effort. Of course it could have gone the other way but it didn't. All in all, I'm glad we own our place.

[PRagic]

Awesome that that worked out for you. Villas can be a crap shoot in terms of property value, but if your place has gone up, it's all smiles. Hope that that continues to be the case going forward. The villa market can be more fickle that the apartment market.

Another reason that some people decide to buy is that the government has decided that it will take an extra special look at the taxes of anyone living in a high cost jeonsae place, but not at those who just go ahead and buy. Just another way of egging the property market on along with, as you mentioned, interest rates for certain types of loans.

Personally, the only thing we'd consider buying is a property with land. I've seen some larger, older villas that come with 40-60 p'young of land. They're not cheap, but at least you get some elbow room and have that land. That, plus these tend to be higher end places with fewer units (e.g. 6 in total), so in the event that anyone is interested in redeveloping the total property, concencus could be reached quicked, and the payoff would be more pronounced given the land value alone. Having said this, the place I'm thinking about was going for a cool million US, and that was 7 or 8 years ago. Probably couldn't get in for that now in that neighborhood (Hapjeong Station).

Wouldn't mind a free standing house, even an older one, if it was in proximity to a subway station in a decent area in Seoul, and if it had at least 50 p'young of land included. You're paying for land value for the most part, so in many neighborhoods, that means about 20-25 million per p'young. Easy to get to or break a million, and we're not too eager to spend that kind of coin for a place here.

Depends on the personal situation, though. If we had kids and wanted that stability, we might grudgingly look at apartments or villas, or even fork over enough to get a house. We're safe for the time being. Just hoping for a nice, big ole bubble pop before we have to move out though!