Seoul dwellings outperform gold, achieving 10-year revenue return of 157.8%

Dwellings in Seoul have shown higher asset revenue returns than key safe assets like gold and the U.S. dollar. Holding dwellings in Seoul for 10 years resulted in a revenue return of over 150%. This means that the value of the asset has increased to more than 2.5 times the initial investment.

The revenue return on dwellings in Seoul was higher compared to the Korea Composite Stock Price Index (KOSPI). However, the 10-year revenue returns of the Nasdaq Composite Index, which focuses on U.S. tech stocks, and the risky asset Bitcoin were higher than the revenue returns of Seoul's housing market. Experts believe that the phenomenon of dwellings in key locations in Seoul being perceived as a type of safe asset is likely to continue, reflecting both residential and investment values in housing prices for the time being.

According to an analysis by Hyundai Motor Securities, based on data from Real Estate 114 and Bloomberg, the 10-year revenue return on Seoul's dwellings recorded 157.8% at the end of last year. This figure compares the average transaction price of all dwellings traded in Seoul at the end of 2014 with the year-end figure from last year, calculated per 3.3 square meters. A revenue return over 150% indicates that if 300 million won was used to purchase the dwelling, its current asset value would exceed 750 million won.

The 10-year revenue return of dwellings in Seoul is even higher compared to gold, a typical safe asset. The 10-year revenue return for gold was recorded at 121.7%. This means that the revenue return of Seoul's dwellings exceeded that of gold by 36.1 percentage points (p). If the revenue return for gold is considered as 100, then the revenue return for Seoul's dwellings is nearly 30% higher.

The KOSPI index (10-year revenue return 25.3%) fell short of the 10-year revenue return of Seoul's housing prices by a factor of less than 6, while the U.S. dollar (10-year revenue return 19.5%) reached only about 1/8 of it. Shin Dong-hyun, an analyst at Hyundai Motor Securities, noted, "The typical safe asset, the U.S. dollar, has low volatility and therefore does not yield high returns, while the KOSPI index has extreme fluctuations that lower returns over the long term. In contrast, Seoul's dwellings have not shown significant declines, and in most cases, their asset values have gradually increased."

Park Won-gap, the chief real estate specialist at KB Kookmin Bank, said, "Key areas in Seoul, such as Gangnam and Yongsan, have already established themselves as global safe assets," adding that "due to the limited space in Seoul, where land cannot be supplied indefinitely, the value of dwellings as an asset is likely to persist for the time being."

However, compared to the Nasdaq Composite Index and Bitcoin, the revenue return of Seoul's dwellings is relatively modest. The Nasdaq Composite Index closed at 4,736.05 on December 31, 2014, whereas it recorded 19,310.79 at the end of last year. When converted to revenue return, this amounts to approximately 307.75%, about double that of Seoul's housing revenue return. Bitcoin, which was trading at around 343,500 won in December 2014, surged to 136.2 million won by the end of last December, resulting in a revenue return exceeding 39,500%.