Korean Job Discussion Forums

[oatmeal]

I'm debating right now whether to invest in a condo
in Korea or back home in Toronto (Canada).

I guess some upscale or valuable areas would be
like Bundang/Seongnam area which is where I'm looking.

Toronto's hot spot seems to be North York or Mid-town (Yonge/Eglinton)
or Downtown (Bloor or College area).

What do you think? If I'm not mistaken, I believe the taxes are much
lower in Korea, and the renters here pay for maintenance, not the owner (me). I'm not sure what the mortgage rate is here and if it's a good time
to buy or not. I think the rates are very low in general right now but I could be wrong.

Anyone want to chime in?

[PRagic]

Interest rates are low and the BOK has room to take them lower. However, government policies have helped to push prices back into the statosphere after they had somewhat quietly abated for the past 5-6 years, particluarly in certain areas of major cities.

Sky high jeeonsay rates and monthly rent jumps, plus some aligned policiies to promote buying, have created a scenario where more and more people, and younger people to boot, are opting to buy rather than pay jeonsay (if they can find any) or monthly rent. This has pushed prices up and driven availability for affordable properties down.

The long and short of it is that I wouldn't touch the real eatate market here with a ten foot pole. NO news has been good, and ALL news points to an inevitable bubble pop.

People, Koreans at least, are paying these prices because they have to live somewhere and market distortions mean that either they pay to own or they flush the money down the john renting high.

Now, however, they can just pay interest on mortgages for an extended period of time, thereby leaving the principle payment for 'somewhere down the road'. The loan spiggots have been turned on full for a while and debt has been piling up. If this system changes, and signs point to changes, then there is going to be a lot of pain felt by owners and consumers here, and this could have a ripple effect on the economy, something the government would like to avoid, but may not be able to as housing prices are crippling as they stand.

So IF you buy, realize that you'll be paying top buck and your ROI will deteriorate once rents come down. Toronoto is uber expensive, too, especially those areas you mentioned, so that might be something to consider as well. Personally, IF we were to invest in a place (we have land here, but not housing, and we bought that back in the late 90s when the economy collapsed), we'd be looking for areas that are nice to live, comparatively inexpensive, and provide a decent return on investment. Smaller cities fit the bill.

For Seoul, I've been predicting a 'mini-sub prime' crisis for the past 5 years. Prices did start sliding, but then the ruling party stepped in agressively to prop up prices. This is the conservative party and their bread is buttered by the money, and money here is in real estate. Time to pay the piper IMHO.

[Jimskins]

This ^

And I'll second that buying property in Korea at the moment is madness. I've got a few friends (Korean and British) who have bought recently. Their justifications were a) I'm sick of moving every 2 years and want some stability and b) might as well, the jonsei is the same as the house price. Fair enough, especially if you are particularly allergic to money.

They feel quite satisfied as their places have increased 10% or so in the past year but I'm convinced this is a brief uptick from those switching from jonsei for the same reasons. They often say "well we've been waiting for house prices to come down in Britain for 10 years and they never have" but the situation is totally different. Britain has a reasonable birth rate and a chronic, I mean CHRONIC shortage of housing (the government outlined proposals today to build one million extra houses over the next 4 years). Korea has almost the lowest birth rate in the World and has been building (and continues building) apartments like they're going out of fashion. This is Supply and Demand 101 chaps, it's all going to end in tears. It may take 5, 10 or even 15 years, but it's coming.

To give a specific example, my parent-in-laws' place -which they have been trying to sell for the past 5 years- at the centre of the bubble in Gangnam has lost over 30% of it's value during that time. They are still no closer to selling it. I think it still has another 25%+ to slip before it bottoms out. This sounds wild but I honestly believe at a rough guesstimate that the Korean property market is overpriced by about 40%. Just my two cents.

[Lazio]

If the housing market does crash what do you think would happen to your jeonse deposit?

Big and expensive apartments, like 100sqm+ have lost a lot of their value over the past few years, especially in certain areas.
In the meantime, the demand for 60sqm places has been rising and therefore the prices too.
As long as the location is good (public transport, various conveniences) and the house is not too big, I don’t think you would lose money. You should look for reasonably priced places, areas. Do the math. If your average Kim family earns say’ 80k/year but the apartments are in the 1million range, you can see how it would take over 12 years to buy that apartment. That is way overpriced. It doesn’t matter how good the location is.
I don’t see how 200k-400k places would lose their value as they are quite affordable for most of the population, and there will be demand for them. Again, as long as they are not in the middle of rice paddies. There is only so much land in cities and that itself would hold its value.

Things to consider if buying in Korea:
You need a down payment of 50%. You can go a bit lower but the interest would be higher.
Mortgage rates are low and may go even lower. I think you can expect around 3%. They won’t throw the best deals at you as you are a foreigner. Currently we pay 2% or maybe even less but I have a Korean wife and this is some special government supported thing.
The tenant is responsible for the monthly maintenance fees but if the place is empty for a few months, obviously the owner should pay.
You can expect around 5-6% return on your investment. For example, a house worth 200k could be rented out approximately for 10k deposit and 900/month. 300k house for 20k, 1.3k/month or 40k 1.1/month. It can be a little more or a little less.
There is tax when you buy and yearly tax. If you pay your own health insurance, beware that it will go up once you own a house.

[jvalmer]

Either Korean birth rates have to tick higher, or Korea opens the floodgates to immigration. Otherwies real estate here is a no-win long term investment imo...

[Jimskins]

[Lazio]

[Fox]

As I understand it, it's not exactly as simple as, "You get the house." After all, other parties can (and often do) have higher priority claims on the house than you do. Isn't it actually the case that said agreement allows you to force sale of the house in order to attempt to recoup your losses, without having to go to court? But if the person, say, had borrowed 50 million won against it, the bank will still get their money before you.

Maybe I'm not understanding the situation absolutely perfectly, but this is what I was told, and it's precisely why I ended up buying a place instead off bothering with jeonse: all the places offering jeonse also had loans against them big enough to ensure I wouldn't get all my money back even in the event of a successful sale.

[Underwaterbob]

[wooden nickels]

[Fallacy]

[Jimskins]

Sorry guys I should have been clearer. You 'get the house' if there are no debts against it, which you can check. We've never got jonsei on a place that had any debt against it, so we're always the first and only creditor. But you do of course pay more for the debt-free places.

The apartment complex we're moving to next year currently has jonseis of 90% of the purchase price. Still not going to buy though.

[Lazio]

[Coltronator]

I second that. The money from your Jonsei is only is even a semi liquid form rarely. I have a specific example. Our Row House (long 3-4 floor apartment building) was bought out and we were given a unit in the new building. We changed where we lived but kept ownership of the unit because it was in a nice location and new. We still had part (40~50%) of a mortgage on our original row house unit so we used the Jonsei that was paid to us to pay off the mortgage and place a Wolsei deposit on our new place. Over the course of the 2 year Jonsei Contract we would have had to save 2.2 k per month if we wanted to pay off the Jonsei at the end. So we ended up selling it after the 2 years and used some of it to give the Jonsei money back. In the worse case scenario we would have just taken out a 20mil loan to top off our savings to meet the Jonsei so there wasn't any nightmare scenario.

Ironically I feel it is safer to Jonsei from an individual rather than a large company. I don't know if it actually is but I trust an individual to be leveraged them self only so far. While a Jonsei company playing a shell game seems more of a risk.

[wooden nickels]

Assume you will be living in Korea for the next 10 years. You have 500 million won. You only have 2 options: Use the 500 to buy an apartment or put the 500 in the bank. Only the two options. No changing up along the way. Which would you do?