Gold recommended as investment alternative as real estate returns decline

CEO Bae Jae-han advised investors to allocate 25% to 50% of assets to gold on KB Real Estate TV, noting that gold outperformed Gangnam apartment returns during the 2006 housing surge. He warned that increasing tax burdens on multi-homeowners are transforming real estate into residential assets rather than investment tools.

The era in which real estate served as the absolute formula for wealth accumulation is coming to an end. As tax burdens increase and the gap in returns based on location widens, gold, a traditional safe-haven asset, is emerging as a new alternative.

According to the investment strategy presented by CEO Bae Jae-han on KB Real Estate TV, a comparison of returns from 20 years ago (based on 2006) shows Nasdaq ranked first, gold second, and S&P500 third. In contrast, KOSPI and KOSDAQ performed poorly enough to fall outside the top rankings. Notably, looking at 2006—a period of surging real estate prices—analysis shows that gold outperformed the high returns seen in Gangnam apartments at that time. 2006 was during the Roh Moo-hyun administration, a period when housing prices began to soar from 2003. While the real estate market was heated, with small apartments under 10 pyeong in the Sincheon area of Jamsil jumping from the 100 million won range to between 300 million and 500 million won, gold's returns were higher by comparison.

"Real Estate is Now for Residence, Not Investment" as Tax Burdens Lower Returns

Bae diagnosed the current real estate market by stating, "The era of making money through real estate has ended for the time being." With more than 70% of South Korean national assets concentrated in real estate, the tax burden faced by multi-homeowners in major areas like Gangnam is eroding returns. He explained that the tax system—including comprehensive real estate tax, rising officially assessed values, and taxes reaching 80% to 85% of capital gains—functions to turn real estate into "homes for residence" rather than "investment assets." "Even if a 1 billion won property becomes 2 billion won, there is nothing left after paying taxes," he added, noting that a single-homeowner household is merely a place to live rather than an investment.

As a practical example, Bae mentioned his experience investing approximately 4 billion won in prime locations such as Haeundae LCT, expressing the view that he would have achieved better returns if that capital had been invested in gold. He emphasized that real estate and gold investments must be approached from entirely different perspectives, noting, "Those holding two or three apartments in Gangnam will struggle greatly due to the tax burden." He also pointed out the practical issue where contracting under a corporation makes it impossible to use the right to request contract renewal, leading individuals to contract under their own names only to face "tax bombs" by becoming multi-homeowner households.

Gold Investment Methods for Office Workers: "Utilize DC Type Retirement Pensions and ETFs"

While gold investment is emerging as an alternative, purchasing expensive physical gold all at once is not easy. Bae suggested a realistic method for office workers: investing through Defined Contribution (DC) type retirement pensions. A key advantage is that by investing in products like the 'TIGER Physical Gold ETF,' which has low annual management fees of around 0.15%, through a retirement pension account, one can naturally engage in split purchases using monthly retirement contributions. Although gold is classified as a risky asset due to its high volatility, split purchasing through retirement pensions can be a stable approach.

He also recommended collecting small amounts of physical gold, such as 1g units or 0.5 and 1 don units, to experience the value of physical gold. This can also serve as a means to educate children on the value of physical assets. Global investment trends are also moving toward increasing gold weightings. Citing the strategies of global investors, Bae introduced the strategy presented by Vancouver America of allocating 25% of assets to US stocks, 25% to bonds, 25% to cash, and the remaining 25% to precious metals, as well as Morgan Stanley's shift from a 6:4 (stocks:bonds) strategy to a 6:2:2 (stocks:bonds:gold) strategy. He advised that individuals should consider gold weightings of 25% to as much as 50% in their own portfolios.

Exchange rate volatility is also a key variable when investing in gold domestically. In periods like the recent one where the Korean won strengthens (exchange rate falls), even if international gold prices stagnate, the domestic gold price forms relatively low, creating a favorable environment for purchasing. Bae explained, "Buying gold at a corrected price when the exchange rate is low is a strategy to catch two birds with one stone: dollar assets and gold investment." His logic is that since the dollar is likely to maintain its strength against the won as a reserve currency in the long term, it is reasonable to buy gold, which is an asset denominated in dollars.

"Brand Value Verification is Essential... Avoid Transactions Between Individuals"

When purchasing physical gold, "reliability" is most important. Bae recommended purchasing products from highly recognized brands such as Korea Minting, Security Printing & ID Card Operating Corporation gold bars, LS M&M, Goldnara, Aura Signature, and Mintido. This is because products with high brand value provide fast compensation or responses if issues with gold content arise. He warned that products from unclear sources or those with insufficient labeling frequently show insufficient content during non-destructive testing. In particular, he cautioned, "Even if it is labeled as 99.9%, it is common for the content to fall short upon inspection."

A specific point of caution is direct transactions between individuals. "Direct transactions between individuals are rife with various incidents and accidents, such as voice phishing," Bae warned, urging that transactions must be made through verified channels. Since gold is an asset passed down to children for decades once purchased, choosing verified gold bars from the start is the way to protect long-term asset value. Regarding when to sell gold, he explained that rather than a specific time, it is appropriate to liquidate the asset's value when money is actually needed, such as for a child's wedding or business expansion.

Bae emphasized, "The value of gold and silver has been proven throughout 5,000 years of human history," adding, "As central banks around the world continue to purchase gold, individuals must also include gold in their portfolios." He diagnosed the current economic situation as an inflection point moving toward a new monetary system and urged interest in traditional, valuable assets.

Source: original video (YouTube)