Seoul housing crisis continues to worsen for young people

Posted on : 2020-07-02 17:13 KST Modified on : 2020-07-02 17:13 KST
Young workers and newlyweds face soaring lump-sum deposits and rental rates
Members of the Citizens’ Coalition for Economic Justice call for the redistribution of real-estate assets of public servants who own multiple properties on July 1. (Jang Cheol-gyu, staff photographer)
Members of the Citizens’ Coalition for Economic Justice call for the redistribution of real-estate assets of public servants who own multiple properties on July 1. (Jang Cheol-gyu, staff photographer)

Jung, 34, recently decided to move after spending four years renting a studio apartment near Dangsan Station, in Seoul’s Yeongdeungpo District, under Korea’s unique “key money (jeonse)” arrangement. Jung had been visiting studio and two-bedroom apartments around the station for a couple of months, but he’d had trouble finding anything for less than 200 million won (US$166,533) in key money, a large lump-sum deposit, a system known as jeonse in Korea that serves as an alternative to monthly rent. Most of the places on the market required monthly rent. The jeonse system was common among Korean landowners in the days when interest rates were high, which made it profitable to simply let a large sum of money sit in an account. Falling interest rates and increasing property taxes, however, have made jeonse fall out of favor.

“The supply of jeonse apartments is drying up. Sometimes a place will be posted in the morning and snapped up that same afternoon,” Jung’s realtor said.

In the end, Jung managed to find a studio apartment for 130 million won (US$108,240) in key money. It was a semibasement apartment, rather like the one that featured in the film “Parasite.”

“If I paid monthly rent, I wouldn’t be able to save any money, but there are hardly any jeonse options out there. I get the feeling that it’s my fate in life to keep hopping around like a grasshopper, without ever buying a house of my own,” Jung said.

Prices for Jeonse apartments Seoul are skyrocketing, creating hardship for renters in the Seoul Capital Area (SCA).

Even jeonse leasing arrangements are becoming a rare commodity as more and more landlords have turned to monthly rent and “half-jeonse” approaches amid the burden of property taxes and low interest rates. Even monthly rental rates are soaring, compounding the woes for younger and working-class people without housing.

Recently, many messages posted on internet café sites frequented by young people have expressed dissatisfaction and anxiety about the rising jeonse prices. A posting on Daum Café linking to an article on the jeonse situation attracted a string of replies.

“All the Seoul jeonse rentals at 100 million won [US$83,262] are semi-basements,” one read.

“When I looked into monthly rents, they’d all gone up by 100,000 won [US$83] from the month before,” read another.

“This has been a disaster specifically for young people without housing who are just starting their careers,” read a third.

“It’s tough enough to get a loan to cover jeonse deposits, but there aren’t even any [rentals] on the market. Getting a jeonse apartment has become basically impossible,” a fourth said.

“My mother, father, and I all can’t find housing. There’s no answer. The future is looking bleak,” said another.

Government regulating single home owners instead of multiple home owners

A 32-year-old company employee and newlywed surnamed Yeo recently listed a two-room apartment in Seoul’s Gwangjin District for a jeonse deposit of over 230 million won (US$191,502). The very next day, a contract was signed. Yeo explained with no key money units to be found, the couple had decided to take out an “everything but our souls” loan to purchase a home.

“[The government] needs to be regulating multiple home owners, but under the situation now, they’re regulating people with one or no home,” Yeo said. “It’s making things even more desperate for people without homes.”

Many landowners simply sitting on empty apartments instead of renting them out at cheaper rates

Some have maintained that the jeonse crisis is being exacerbated by owners of newly built apartments, who are leaving units vacant rather than making them available amid soaring jeonse prices. With the rise in rent restricted to 5%, they are choosing to set the initial contract price at the maximum and then pay the low penalty interest as they wait. A 32-year-old surnamed Yoon who has lived in a jeonse apartment in the Buk Ahyeon neighborhood of Seoul’s Seodaemun District with their spouse for the past five years explained, “We looked around at new apartments in Sincheon to find another jeonse apartment, but they were talking about figures like 700 million won [US$582,717].”

“That’s too steep for us, so we didn’t move. We have until next year on our contract, so we can hold out until then, but we’re worried and anxious right now, not knowing how much the key money costs are going to rise if the current trend keeps up.”

Experts were unanimous in their disappointment with the real estate measures adopted by the South Korean government on June 16.

“The government hasn’t even been able to rein in housing prices, and they didn’t offer any measures to keep rental costs in check,” said Kim Heon-dong, who heads the real estate headquarters for the group Citizens’ Coalition for Economic Justice (CCEJ).

“This is a situation where the lack of measures on the government’s part and speculation by the established generations have led to a housing crisis for young people,” Kim concluded.

Jeong Yong-chan, secretary general of the group Min Snail Union, said, “The policy direction is the right one, but more than that, they need basic measures to provide housing stability for renters, including a ceiling on jeonse prices.”

By Chai Yoon-tae, Lee Jae-ho, and Jeon Gwang-joon, staff reporters

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